100% EOU is entitled to benefit of refund of Cenvat Credit under rule 5 of Cenvat Credit Rules, even if the final products are exempted

Facts:- The respondent is a 100% Export Oriented Unit (‘EOU’ for short) engaged in the manufacture of parts of agricultural and farm equipment which are chargeable to ‘Nil’ rate of duty under Central Excise Tariff Act, 1985 (Tariff Act). The respondent filed three refund claims with the Assistant Commissioner of Customs, Bengaluru under Rule 5 of the Cenvat Credit Rules, 2004, being the unutilised credit availed by the respondent in respect of certain inputs used in the manufacture and export of their final product.

The said refund claims were, however, rejected by the Assistant Commissioner, Customs, on the ground that the respondent was not eligible for the availment and utilisation of Cenvat Credit Rules, 2004, as their final product was not chargeable to any duty under the Tariff Act. It was, further, held that Rule 6(6) of the Cenvat Credit Rules, 2004 exempting a unit from proportionate reversal of Cenvat credit on clearance of exempted goods when exported under bond without payment of duty, could not be extended to the respondent, as the exports made by EOU were not covered under the Rule. Being aggrieved by the same, the respondent filed an appeal before the Commissioner of Customs (Appeals) who set aside the Order of the Assistant Commissioner, Customs. The appeal filed by the Revenue against the order of Commissioner (Appeals) before the Tribunal was also dismissed based on an earlier judgement on an identical issue. Hence, the revenue is in appeal before the CESTAT.

Held:- High Court rejected the appeal of the revenue primarily on the ground that the Tribunal has dismissed the revenue’s appeal based on the reasoning of its earlier order on an identical issue, the appeal against which was dismissed by this very High Court. As there was nothing on record to show that the revenue has filed an appeal against this order of High Court before the Apex Court and/ or the Apex Court has stayed the operation of earlier order in any manner, the earlier order has attained finality and the issue is no longer res integra between the parties.

Authority:- Commissioner of Customs, Bengaluru Vs. ANZ International– 2009 (243) E.L.T. 40 (Kar- HC)

NF