2009 (3) TMI 535 - AT - Central Excise

Refund of - Cenvat credit - Held that - Rule 5 provides refund in respect of goods which are used in the intermediate product cleared for export also. Now that 100% EOUs are eligible for Cenvat credit and when they pay duty in respect of DTA sales, credit is admissible to the recipients - CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to rejection of refund claim of Cenvat credit for inputs supplied to 100% EOUs.

Analysis:
In this case, the appellants contested the denial of their refund claim for Cenvat credit on inputs used in goods supplied to 100% EOUs. While their claim for goods cleared to Special Economic Zone was accepted, the claim for 100% EOUs was rejected on the basis that it constituted a deemed export, not a real export.

The appellant's representative relied on the Supreme Court's decision in Virlon Textile Mills Ltd., asserting that deemed exports are equivalent to physical exports. Additionally, reference was made to a circular allowing drawback for deemed exports and a Tribunal decision in Sanghi Textile Ltd., supporting the availment of deemed credit for goods cleared to 100% EOUs. Conversely, the respondent cited the Madras High Court's ruling in BAPL Industries Limited and the Tribunal's decision in Quality Screens to oppose the appellant's arguments.

Upon reviewing the submissions, the Tribunal noted that the Sanghi Textile Ltd. decision, a Divisional Bench ruling, was not considered in the Quality Screens case. It was observed that Rule 5 allows refunds for goods used in intermediate products cleared for export, including those for 100% EOUs eligible for Cenvat credit. Acknowledging the eligibility of 100% EOUs for Cenvat credit and the admissibility of credit when they pay duty for DTA sales, the Tribunal concluded that the Cenvat credit should be allowed. Consequently, the appeal was upheld in favor of the appellants, granting them consequential relief.

This judgment highlights the importance of interpreting rules and precedents in the context of specific scenarios, ensuring equitable treatment and adherence to legal provisions governing Cenvat credit claims for exports to different entities.