2017 (8) TMI 396 - AT - Customs

Refund of unutilised CENVAT credit - deemed exports - Held that - the input service credit attributable to such IUT, where the deemed exports are to be treated at par with physical exports - refund allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Eligibility for refund of unutilized input service credit for physical exports and deemed exports.

Analysis:
The appeal was filed by the Revenue against the Commissioner (A)'s order allowing the respondent-assessee's refund claim for unutilized input service credit for both physical exports and deemed exports. The respondent, engaged in manufacturing and exporting pharmaceutical products, had claimed refunds for various input services used in the manufacture of final products cleared for export. The Deputy Commissioner had partially allowed the refund but disallowed amounts related to services not utilized for manufacturing exports. The Commissioner (A) set aside the Order-in-Original, holding the assessee eligible for the refund of unutilized input service credit for both physical and deemed exports. The Revenue contended that not all services were exclusively used for manufacturing goods and some were business expenses not equated to input services. The respondent argued that Inter Unit Transfers (IUT) between EOUs should be considered deemed exports, and input service credit for such transfers should be allowed. The Tribunal, after considering both parties' submissions and previous decisions in the assessee's case, upheld the Commissioner (A)'s order, dismissing the Revenue's appeal.

The Revenue argued that the impugned order misinterpreted the definition of input service, emphasizing that Rule 5 of CENVAT Credit Rules allows refunds for services used in manufacturing goods. They contended that not all claimed services were exclusively used for manufacturing and some were business expenses. On the other hand, the respondent defended the order, stating that IUTs between EOUs should be considered deemed exports, and input service credit for such transactions should be allowed. They cited previous tribunal decisions in the assessee's case to support their argument. The Tribunal found no infirmity in the Commissioner (A)'s order and upheld it, dismissing the Revenue's appeal.

The Deputy Commissioner had allowed partial refunds but disallowed amounts related to services not directly utilized for manufacturing exports. The Commissioner (A) set aside this decision, allowing refunds for both physical and deemed exports. The Revenue contended that not all services were exclusively used for manufacturing goods, while the respondent argued that services related to IUTs between EOUs should be considered for refunds. The Tribunal upheld the Commissioner (A)'s decision, stating that there was no issue with the order and dismissed the Revenue's appeal.