2017 (12) TMI 269 - AT - Central Excise

Refund claim - deemed export to 100% EOU - denial on the ground that the supplies made to 100% EOU cannot be treated as deemed export - Rule 5 of Cenvat Credit Rules 2004 - Held that - on careful reading of the unamended and amended Rule 5 of the Cenvat Credit Rules, it is found that there is no significant difference, as regard term export for the purpose of Rule 5 of Cenvat Credit Rules, 2004, therefore there is no reason to interpret differently the term export under the amended Rule 5 - the appellant is entitled for the refund under Rule 5 against the supplies made to the 100% EOU. Reliance placed in the case of M/s. Uniworth Textiles Ltd. Versus CCE, Raipur 2016 (8) TMI 939 - CESTAT NEW DELHI , where it was held that the clearances to 100% EOU be considered on par with physical export for which refund of un-utilised cenvat credit is allowable. Appeal dismissed - decided against Revenue.

Summary

Issues:
Refund claim of input duty for input service used in manufacturing final product supplied to 100% EOU as deemed export - Interpretation of amended Rule 5 of Cenvat Credit Rules 2004 - Eligibility of refund for supplies to 100% EOU as deemed export.

Analysis:
The issue in this case revolved around a refund claim of input duty for the input service used in the manufacturing of a final product supplied to a 100% Export Oriented Unit (EOU) as deemed export. The Ld. Commissioner (Appeals) partially allowed the refund claim, citing the amended Rule 5 of Cenvat Credit Rules 2004, which prescribed a formula and a specific definition of export turnover of service. The Commissioner contended that under the amended Rule, supplies to 100% EOU cannot be treated as deemed export, thus making the refund inadmissible. Both the Revenue and the appellant filed appeals against the decision - the Revenue appealing the part refund allowed and the appellant appealing the part refund disallowed.

During the proceedings, the Ld. Superintendent (A.R.) representing the Revenue reiterated the findings of the impugned order, where the refund was rejected. He argued that under the amended Rule 5, only physical exports, i.e., taking goods out of India, were eligible for the refund, not deemed exports. He relied on a judgment by the Principal Bench of the Tribunal in a similar case to support his argument.

On the other hand, the Ld. Advocate for the assessee argued that both refund claims were for a period after 1.4.2012 when the amended Rule 5 was in operation. She contended that supplies made to 100% EOU should be considered as export, including deemed export. To support her argument, she cited several judgments where similar issues were decided in favor of the assessee.

After considering the submissions from both sides and examining the relevant rules and judgments, the Member (Judicial) found that the term 'export' under the amended Rule 5 of Cenvat Credit Rules did not differ significantly from the unamended rule. Therefore, the judgments cited by the Ld. Advocate were deemed applicable post 1.4.2012. The Member distinguished the judgment relied upon by the Revenue, noting that it pertained to supplies made to a Special Economic Zone (SEZ) and not to a 100% EOU. Consequently, the appellant was held entitled to the refund under Rule 5 for supplies made to the 100% EOU, leading to the modification of the impugned orders. The appeal filed by the party was allowed, while the appeals filed by the Revenue were dismissed.