Whether DTA unit clearing the goods to 100% EOU can be termed as export, allowing DTA unit to claim refund of unutilised Cenvat credit?

PJ/CASE LAW/2015-16/3011

Case:-COMMISSIONER VersusMETFLOW CAST PVT. LTD.

Citation:- 2016 (331) E.L.T. 355 (Guj.)

Brief facts:- The appellant-Commissioner of Central Excise and Customs, in this appeal under Section 35G of the Central Excise Act, 1944 (hereinafter referred to as ‘the Act’) has challenged the order dated 2nd January, 2014 passed by the Central Excise and Service Tax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’) in Appeal No. E/13793/2013, by proposing the following three questions stated to be substantial questions of law :
“(1)      Whether Tribunal committed error in following law settled by Hon’ble High Court of Gujarat reported at 2012 (276)E.L.T.9 (Guj.) = 2013 (29)S.T.R.208 (Guj.) in the case of NBM Industries, though factual and legal aspects in the present case are quite different?
(2)        Whether DTA unit clearing the goods to 100% EOU can be termed as export, allowing DTA unit to claim refund of unutilised Cenvat credit?
(3)        Whether Tribunal committed error in interpreting provisions of Rule 5 of Cenvat Credit Rules, 2004?”
The issue involved in this case is regarding refund of the Cenvat credit availed by the respondent assessee on the inputs/input services/capital goods which were utilised and consumed in manufacturing of goods which were cleared to a 100% Export Oriented Unit (EOU) without payment of duty on ARE-1/ARE-3 and CT-3 certificates. The respondent assessee is engaged in the manufacture and clearance of cast articles of alloy steel, stainless steel and other engine parts and also availing Cenvat credit facility under the Cenvat Credit Rules, 2004 (hereinafter referred to as “the Rules”). The respondent filed a refund claim of Rs. 78,05,272/- under Rule 5 of the Rules read with Notification No. 5/2006-C.E. (N.T.), dated 14th March, 2006 for unutilised Cenvat credit (for the period from April, 2010 to March, 2011) lying in balance on account of clearances to a 100% EOU under ARE-3/CT-3 without payment of duty. The Assistant Commissioner, Central Excise, Division-II, Rajkot, issued a show cause notice dated 31st January, 2012, proposing to reject the refund claimed. The show cause notice came to be adjudicated by an Order-in-Original dated 24th May, 2012, whereby the proceedings were dropped in the light of the decision of the Supreme Court in the case of M/s. Shilpa Copper Wire Industries[2010 (255) E.L.T. A15 (S.C.)] and M/s. Amitex Silk Mills Pvt. Ltd. [2010 (254) E.L.T. A98 (S.C.)]. Accordingly, refund to the tune of Rs. 76,98,104/- came to be sanctioned under Section 11B of the Act. The appellant carried the matter in appeal before the Commissioner (Appeals), who allowed the appeal by an Order-in-Appeal dated August 30, 2013. The assessee carried the matter in appeal before the Tribunal and succeeded.

Appellant’s contention:-Mr. Y.N. Ravani, learned senior standing counsel for the appellant, submitted that the Tribunal has erred in placing reliance upon the decision of this Court while allowing the appeal of the respondent inasmuch as the same has been rendered in a case where clearances were made from one 100% EOU to another 100% EOU, whereas the present case relates to clearances made by a DTA (Domestic Tariff Area) to a 100% EOU. It was further submitted that the Tribunal has failed to take into consideration the Circular F.No. 267/124/2007-CX.8, dated 24th March, 2008, wherein it has been stated that the DTA units do not physically export the excisable goods but merely supply the goods to 100% EOU. It was submitted that, therefore, the provisions of Rule 5 of the Rules are not applicable and the remedy lies in claiming refund of terminal excise duty from the Ministry of Commerce as per the Foreign Trade Policy and the provisions in the Handbook of Procedures (Vol. 1). In support of his submissions, the learned counsel placed reliance upon the decision of the Madras High Court in the case of BAPL Industries Ltd.v. Union of India, 2007 (211)E.L.T.23 (Mad.), for the proposition that physical export is not a deemed export and the concession granted to the petitioner under Chapter 10 of EXIM Policy is deemed export and not an export and, hence, cannot be extended for local sale to the DTA or local sale made by a 100% EOU to another 100% EOU. It was, accordingly, urged that the appeal requires consideration and is required to be admitted on the questions as proposed or as may be deemed fit by this Court.

Respondent’s contention:- None is represented on behalf of respondent.

Reasoning of judgment:-This Court has perused the impugned order passed by the Tribunal as well as the orders passed by the lower authorities and has considered the submissions advanced by the learned counsel for the appellant. As can be seen from the impugned order, the Tribunal has placed reliance upon a decision of this Court in the case of Commissioner of Excise and Customsv. NBM Industries Pvt. Ltd., 2012 (276)E.L.T.9 (Guj.) = 2013 (29)S.T.R.208 (Guj.)and upon appreciation of the material on record has found that the present case stands squarely covered by the said decision and has, accordingly, allowed the appeal preferred by the assessee. A perusal of the above referred decision of this Court reveals that one of the questions raised in the appeal was as to whether clearances made by one 100% EOU to another 100% EOU which are “deemed exports” are to be treated as physical exports for the purpose of entitling refund of unutilised Cenvat credit contemplated under the provisions of Rule 5 of the Cenvat Credit Rules, 2004. The Court found that the issue involved stood squarely covered by the decisions of the Tribunal in the case of AmitexSilk Mills Pvt. Ltd., Commissioner of Central Excisev. Ginni International Ltd. and Sanghi Textiles Ltd. v. Commissioner of Customs and Central Excise. The Court while taking note of the fact that the appeal against the decision of the Tribunal in the case of Amitex Silk Mills Pvt. Ltd. has been admitted by the Supreme Court, also noticed that the decision of the Tribunal in the case of Ginni International Ltd. [2002 (139) E.L.T. 172 (Tri.-Del.)] was challenged before the Supreme Court and the Court in its decision reported in 2007 (215) E.L.T. A102 (S.C.), while dismissing the Revenue’s appeal against the Tribunal’s order, held that once the Development Commissioner gives permission to the assessee, a 100% EOU, to sell goods in DTA up to a specified value, the Revenue cannot go behind such permission and dispute it holding that for fixing the limit only physical exports and not deemed exports should be taken into account. The Court also took note of the fact that against the decision of the Tribunal in the case of Sanghi Textiles Ltd. v. Commissioner of Customs and Central Excise, the Revenue had preferred appeal before the Supreme Court which came to be dismissed by reiterating what was held in Ginni International Ltd.
Insofar as the decision of the Madras High Court on which reliance has been placed on behalf of the Revenue, the Tribunal found that there was a decision of the jurisdictional High Court directly on the issue and was therefore, bound by it. The Tribunal further observed that the Supreme Court in the case of Virlon Textile Mills Ltd.v. Commissioner of Central Excise, Mumbai, 2007 (211)E.L.T.353 (S.C.), has, though not in an identical situation, while examining the nature of the DTA as well as the 100% export oriented units, observed that the DTA sales against foreign exchange or other supplies in India can be equated with physical exports. Thus, the Tribunal has applied a decision of this Court to the facts of the case and found that the issue stands covered by such decision.
Insofar as clearances from DTA units to 100% export oriented units are concerned, the Tribunal has placed reliance upon the above decision of the Supreme Court wherein it has been held that DTA sales against foreign exchange or other supplies in India can be equated with physical exports. Thus, the Tribunal has merely applied decisions of the jurisdictional High Court as well as the Supreme Court to the facts of the case while holding that DTA unit clearing goods to 100% EOU can be termed as export for the purpose of allowing DTA unit to claim refund of unutilized Cenvat credit. Under the circumstances, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to any question of law, much less, a substantial question of law so as to warrant interference.
In absence of any substantial question of law, the appeal fails and is, accordingly, summarily dismissed.

Decision:- Appeal dismissed

Comment:- The case is related to allowance of refund in respect of unutilized Cenvat Credit under rule 5 of Cenvat Credit Rules, 2004 in the case when DTA unit clears the goods to 100% EOU.Goods cleared to 100% EOU unit is consider as deemed export. The High Court held that DTA unit entitled to claim refund of unutilized Cenvat credit.

Prepared by:- Monika Tak

Comments

PJ/CASE LAW/2015-16/3011

Post a Comment

Query