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TMI Blog2006 (7) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... e credit accumulated is to be utilized towards payment of duties on the final products. As the appellant supplied goods to 100% EOUs without payment of duty, all the credit accumulated could not be utilized. They could utilize credit to the tune of Rs. 65 lakhs. However, Revenue issued Show Cause Notice for recovery of the credit availed on the ground that the appellants are not entitled for availing deemed credit for the reason that the final products were not exported under bond and cleared only to other 100% EOUs/Merchant Exporters. The Commissioner held that the credit utilized by the appellant is inadmissible for the reason that they failed to produce any evidence in support of their claim that the goods cleared by them without payment of duty were in fact exported under bond. Hence, in the impugned order he demanded an amount of Rs. 65,00,000/- being the Cenvat Credit wrongly availed/utilized towards payment of duty during the months of November 2003 and July 2004 under Rule 12 of the Cenvat Credit Rules, 2002 read with Section 11A of the Central Excise Act, 1944. Further, he demanded interest under Section 11AB of the C.E. Act, 1944. He imposed a penalty of Rs. 5,00,000/- un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cleared for home consumption or for export on payment of duty and, where for any reason, such adjustment is not possible, by refund to the manufacturer. In the present case, the appellants were not in a position to utilize beyond Rs. 65 lakhs out of the deemed credit accumulated. Hence, they filed a refund claim to the lower authority for refund of the credit not utilized. The lower authority rejected the refund on the ground that there is no evidence of export by the appellants. In fact, the refund amount relating to the accumulated credit pertains to the goods cleared to 100% EOUs. The stand of the department is clearance to 100% EOUs cannot be termed as exports. The Commissioner (Appeals) set aside the lower authority's order rejecting the refund. However, with regard to the amount of Rs. 65 lakhs utilized by the appellant, Revenue proceeded to recover the same on the ground that the appellants are not entitled even to take the credit: The availment of credit on grey fabrics received is governed by the Notifications 53/2001 and 6/2002. So long as the appellants satisfy the conditions of the notification, the credit cannot be denied. The final products can be cleared on payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 2 of Rule 19 of Central Excise Rules read with Rule 5 of Cenvat Credit Rules, 2000 and the assessees are not eligible for refund of any unutilized Cenvat credit in terms of Rule 5 of Cenvat Credit Rules. 9. The respondents approached the Commissioner (Appeals), who passed the impugned order, allowing the appeal of the respondents with consequential relief. The Commissioner (Appeals) has given a finding that Paragraph 3 of the 'Deemed Export' Notifications does not specify that the export should be only under Rule 19 of the relevant Rules in vogue. She has stated that the clearances of the respondents fall within the principle laid down by the Tribunal in the case of CCE, Ahmedabad v. Omkar Textiles - 2002 (148) E.L.T. 461(Tri.-Mumbai) wherein it is held that credit can be taken of duty paid on inputs used in processed fabrics which were cleared without payment of duty under Notification 47/94-CE and used in manufacture of processed fabrics. She has also relied on the decision in UIC Wires - 2003 (158) E.L.T. 723(Tri.-Kolkata). 10. Revenue has come in appeal against the impugned order on the following grounds:- (i) In the instant case, the goods were neither cleared for hom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... = 2006 (73) RLT 427 (CESTAT-Mum) (e) CCE, Kolkata-III v. UIC Wires Ltd. - 2003 (158) E.L.T. 723 (Tri.-Kolkata) (f) Navbharat Industries v. CCE, Thane-I - 2006 (199) E.L.T. 148 (Tri.) = 2006 (133) ECR 0476 (Tri.-Mumbai) (iii) The department has accepted that the proof of exports was submitted to the Commissioner (Appeals). Once it is accepted that the goods are exported and documents were produced to the department, at any stage, it cannot be a ground for rejecting the refund claim. (iv) As regards limitation, the department has taken a new ground at this stage. The Show Cause Notice did not propose to reject the refund claim on the ground of limitation. This point was never an issue in the OIO or in the OIA. It is only at this stage, the department has brought in this argument which is not tenable. In any case, the respondents submit that the refund claim was well within time. (v) The refund of Deemed Credit is sought to be denied on the ground that the supplies made to EOUs/Merchant Exporters are not covered by the expression 'export under bond'. (vi) The term 'Export' has to be understood to include Deemed Export in the absence of a definition of 'Export' either in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N.T.) dated 29-6-2001 and Notification No. 6/2002-C.E.(N.T.) dated 1-3-2002 have been issued under Rule 11 of Cenvat Credit Rules. Para 2 of the above Notification indicates the quantum of Deemed Credit which can be taken by the manufacturers. While availing the credit, it is not necessary to produce any documents evidencing payment of duty on the inputs. That is why this credit is called Deemed Credit. The Cenvat Credit is usually utilized in the payment of excise duty on clearance of final products. The Deemed Credit is also meant for utilization towards payment of duty of excise leviable on the final products. Both the notifications indicate in a table, the inputs and the final products. If any manufacturer satisfies the conditions of the above Notifications, they would be entitled for availing Deemed Credit. 13.2. We have already stated that the Deemed Credit is to be used towards payment of duty on the clearance of final products. In the present case, an amount of Rs. 65 lakhs has already been utilized on payment of duty on the final products cleared for home consumption. As per para 2 of the Notification, Deemed Credit can be taken or the credit is allowed at the time of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no need to pay Central Excise duty on such clearance. According to Revenue, in that situation, no Deemed Credit can be availed. This is not a correct interpretation of law and the said notifications. If that were the case, even in para 2 of the Notification, the expression 'at the time of clearance of the said final products' would have been amplified to mean that the said clearance is only for clearance of home consumption and export under bond. Moreover, the proviso to para 3 of the Notification says that the credit in respect of the final products shall be allowed to be utilized towards payment of duty of excise for home consumption or for export on payment of duty and where for any reason, such adjustment is not possible, by refund to the manufacturer. We shall also reproduce para 3 for clear understanding. "3. The credit of declared duty allowed in respect of the declared inputs shall be utilized only towards payment of duty of excise leviable under the said Central Excise Act, on the said final products: Provided that the credit of declared duty in respect of the declared inputs used in the final products cleared for export under bond shall be allowed to be utilize ..... 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