2020 (1) TMI 232 - AT - Central Excise

Refund of accumulated CENVAT Credit - inputs used in manufacture of finished goods cleared by them to 100% EOU - Rule 5 of the CENVAT Credit Rules 2004 - N/N. 42/2001-CE (NT) - HELD THAT - It is quite well established that Central Excise Rules and Authorities themselves provide for clearance/ supply of goods without payment of duty for being used in the manufacture of goods to be finally exported subject to the above stated restriction and procedure. Hence by referring to the definition of Export as incorporated in Customs Act 1962 for restricting the scope of Rule 5 of CENVAT Credit Rules 2004 to cases of the physical exports outside India will be contrary to the provisions of Central Excise Rules and Notifications issued under the said Rules. It is a settled principle of interpretation of statue that it should be interpreted strictly as per the expressed provisions/ language employed in the statue without referring to any external aid. It is only in case of ambiguity that the reference could have been made to external aids or the definitions in the similar statue. From plain reading of Rule 5 of CENVAT Credit Rules 2004 along with Rule 19 of Central Excise Rules 2002 and Notification No 42/2001-CE (NT) it is concluded that the refund of accumulated CENVAT Credit in terms of Rule 5 is admissible in the case of goods supplied for manufacture of goods exported. In the present case the claim of refund has been made in respect of goods which have been cleared by the appellants to 100 % EOU without payment of duty by following the procedure as prescribed. It is not the case of the revenue that the goods were exempted goods and for that reason cleared without payment of duty. If the goods were exempted goods then the issue would not have been for refund of accumulated credit but for denial of the credit itself. There is no provision in the Central Excise Act or Rules other than Rule 19 which permits clearance of dutiable goods without payment of duty. There is no dispute in respect of this in the present case. Contrary decision of Tribunal in case of Tiger Steel Engineering Pvt Ltd 2010 (7) TMI 324 - CESTAT MUMBAI has been stayed by the Hon ble Bombay High Court in TIGER STEEL ENGG. (I) PVT. LTD. VERSUS COMMISSIONER 2010 (12) TMI 1156 - BOMBAY HIGH COURT - Since we have held that the benefit of rule 5 is admissible in respect of clearances made without payment of duty in terms of Rule 19 of Central Excise Rules 2002 we find that the decision of Madras High Court in case of BAPL INDUSTRIES LTD. VERSUS UNION OF INDIA 2006 (11) TMI 68 - HIGH COURT MADRAS is distinguishable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Refund of accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004.
2. Interpretation of "export" under Rule 19 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Refund of accumulated CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004:

The appellant claimed a refund of accumulated CENVAT Credit amounting to Rs. 2,03,33,842/- for goods cleared to 100% Export Oriented Units (EOUs) between January 2010 and March 2010. The jurisdictional Assistant Commissioner rejected the refund claim, which was upheld by the Commissioner (Appeals). The Commissioner (Appeals) noted that there was no proof that the CENVAT credit claimed was admissible and that the inputs on which the credit was availed were used in the manufacture of goods cleared to 100% EOUs. It was also observed that clearances to 100% EOUs do not automatically mean actual export, and documentary evidence of actual export was necessary. The Commissioner (Appeals) concluded that clearances to EOUs not effected under bond were not actual exports and thus not entitled to a refund under Rule 5 of the CENVAT Credit Rules, 2004.

2. Interpretation of "export" under Rule 19 of the Central Excise Rules, 2002:

The tribunal considered the provisions of Rule 5 of the CENVAT Credit Rules, 2004, and Rule 19 of the Central Excise Rules, 2002. Rule 5 allows for the refund of CENVAT credit if the input or input service is used in the manufacture of final products cleared for export under bond or letter of undertaking. Rule 19 provides for the export of goods without payment of duty, subject to conditions and safeguards specified by the Board. The tribunal noted that clearances made under Rule 19(1) and Rule 19(2) are considered exports, as clarified by the Board in the Central Excise Manual.

The tribunal emphasized that the definition of "export" in the Customs Act, 1962, should not restrict the scope of Rule 5 of the CENVAT Credit Rules, 2004, to physical exports outside India. It is a settled principle of statutory interpretation that the statute should be interpreted strictly as per the expressed provisions without referring to external aids unless there is ambiguity. The tribunal cited the Supreme Court's decisions in Doypack Systems Pvt Ltd and Dilip Kumar & Co, which upheld the principle of plain reading of the statute.

The tribunal concluded that the refund of accumulated CENVAT Credit in terms of Rule 5 is admissible for goods supplied for the manufacture of goods to be exported. The tribunal referred to several High Court decisions, including Shilpa Copper Wire Industries, Nash Industries, and JBM Auto Limited, which held that clearances to 100% EOUs are deemed exports and eligible for a refund of unutilized CENVAT credit.

Conclusion:

The tribunal found no merit in the impugned order and allowed the appeal, granting the refund of accumulated CENVAT Credit to the appellant. The tribunal distinguished the contrary decision of the Madras High Court in BAPL Industries Ltd and noted that the decision in Tiger Steel Engineering Pvt Ltd had been stayed by the Bombay High Court. The tribunal's decision aligns with the settled legal position that clearances to 100% EOUs are deemed exports and eligible for a refund under Rule 5 of the CENVAT Credit Rules, 2004.