2008 (2) TMI 93 - AT - Central Excise

Refund claim for un-utilised credit assessee, EOU procured the duty paid inputs and availed the benefit of credit - inputs were used by them in the manufacture of final products, which was cleared to another 100% EOU, as deemed export plea of revenue that deemed export cannot be treated at par with physical export, is rejected held that as the final product were cleared to another 100% EOU as deemed export, the same has to be treated as export & refund of un-utilised credit has to be made

Summary

Issues Involved:
Refund claim for un-utilised cenvat credit by 100% EOU on deemed export to another 100% EOU, interpretation of Rule 5 of Cenvat Credit Rules, 2004, applicability of deemed export in refund claims, reliance on Tribunal's decision in Amitex Silk Mills case, consideration of Board's Circular No. 220/54/96-CX.

Analysis:
1. Refund Claim for Un-utilised Cenvat Credit: The respondent, a 100% EOU engaged in manufacturing copper products, filed a refund claim for un-utilised cenvat credit amounting to Rs.36,41,330. The claim was based on the inputs procured and modvat credit availed by them, which were used in manufacturing final products cleared to another 100% EOU as deemed export.

2. Interpretation of Rule 5 of Cenvat Credit Rules, 2004: The original adjudicating authority denied the refund claim citing Rule 5, which allows refund of un-utilised credit only when goods are physically exported within the country. The Commissioner (Appeals), however, allowed the claim by relying on the Larger Bench decision in Amitex Silk Mills case, which held that deemed export should be treated at par with physical export.

3. Applicability of Deemed Export in Refund Claims: The Tribunal considered whether deemed exports should be included in the total export for computing the FOB value. The Tribunal, in the case of Sanghi Textiles Ltd., decided that final products cleared to another 100% EOU as deemed export should be treated as export, thereby allowing the refund of un-utilised credit to the assessee.

4. Reliance on Tribunal's Decision in Amitex Silk Mills Case: The Tribunal referred to the decision in Amitex Silk Mills case, emphasizing that deemed exports have all the elements of exports and should be given equal weightage. The decision highlighted the economic efficiency of deemed exports and the benefits they offer to both sellers and buyers.

5. Consideration of Board's Circular No. 220/54/96-CX: The Tribunal also considered Board's Circular, which emphasized the importance of expeditiously deciding refund claims for unutilised Modvat credit to maintain the competitiveness of the Indian industry in the international market. The Circular underscored the significance of granting such claims to incentivize manufacturers and exporters.

In conclusion, the Tribunal rejected the Revenue's appeal, affirming the allowance of the refund claim for un-utilised cenvat credit by the respondent based on the deemed export of final products to another 100% EOU. The decision was supported by the interpretation of relevant rules, judicial precedents, and circulars emphasizing the importance of promoting exports and maintaining competitiveness in the international market.