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2007 (11) TMI 218 - AT - CustomsIn the case of 100% EOUs, the input can be imported free of duty - They can be obtained indigenously also free of duty - Rule 5 of the CENVAT Credit Rules provides for refund of Cenvat credit where the appellants are not able to utilize the same - appellants had availed Cenvat credit and they were not in a position to utilize the same for the reason that all the products were exported as per Rule 5 CCR, they are rightly entitled for the refund of unutilized credit
Issues:
- Refund of Cenvat credit for duty paid inputs by 100% EOU for exported goods under Rule 6 of CENVAT Credit Rules. Analysis: 1. Issue of Refund for Exported Goods: The appeals were filed against Orders-in-Appeal rejecting refund claims of Cenvat credit for duty paid inputs by a 100% EOU, which were exported. The lower authorities held that credit of duty paid on inputs was not admissible under Rule 6(1) of the CENVAT Credit Rules as the final products were subject to NIL rate of duty, making them exempt. The Commissioner (Appeals) upheld this decision, stating that if the finished products are exempt from duty, the credit could not have been availed. The Revenue argued that if the appellants were not entitled to credit, there was no basis for refunding it. 2. Distinction Between Exempted and Exported Goods: The appellant's advocate argued that there is a difference between exempted and exported goods, citing case laws to support the distinction. It was highlighted that exported goods are not necessarily exempted goods and that the provisions of Rule 6(1) should not apply to exports. The advocate pointed out that the appellants, as a 100% EOU, could have obtained duty-free indigenous inputs under certain circumstances, but they chose to procure duty paid goods for trade reasons. 3. Interpretation of Rule 6(6) of CENVAT Credit Rules: The Member (T) analyzed Rule 6(6) of the CENVAT Credit Rules, which carves out exceptions to Rule 6(1). It was noted that goods removed without payment of duty and cleared for export under bond are exempt from the provisions of sub-rules (1), (2), (3), and (4) of Rule 6. The Member emphasized that the lower authorities failed to apply this exception to the appellant's case, as the goods were exported under the 100% EOU Scheme. The Member clarified that any exported goods do not attract Central Excise duty, and there is no prohibition for 100% EOUs to avail Cenvat credit under Rule 5 for refund when unable to utilize the credit. 4. Precedents and Legal Interpretation: The Member referred to various case laws to support the appellant's entitlement to Cenvat credit and refund under Rule 5 of the CENVAT Credit Rules. It was highlighted that in cases where finished goods were exempted but exported, refund of Cenvat credit on inputs was deemed admissible. The Tribunal's decisions in similar cases were cited to establish the appellant's right to claim the refund in line with the provisions of the CENVAT Credit Rules. 5. Judgment and Relief: After a thorough consideration of the issue, the Member concluded that the appellants, being a 100% EOU, were entitled to Cenvat credit on duty paid inputs for exported goods and subsequently for a refund under Rule 5 of the CENVAT Credit Rules. The Member ruled in favor of the appellants, rejecting the impugned Orders and allowing the appeals with consequential relief. In conclusion, the judgment delivered by the Appellate Tribunal CESTAT, Bangalore, in the cited case, clarified the entitlement of a 100% EOU to claim Cenvat credit and refund for duty paid inputs used in the manufacture of goods that were subsequently exported. The analysis focused on the interpretation of relevant rules, distinctions between exempted and exported goods, and the application of precedents to support the appellant's claim for refund.
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