Wave Mechanics Pvt. Ltd. Vs Commissioner of Central Tax (CESTAT Bangalore)
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bangalore bench, has ruled that a 100% Export Oriented Unit (EOU) is not eligible for a cash refund of accumulated Cenvat credit on goods supplied to other EOUs after March 1, 2015. However, the tribunal clarified that the assessee is entitled to take re-credit of the amount debited while claiming the refund.
The case involved Wave Mechanics Pvt. Ltd., an EOU manufacturing RF/Microwave components. The company had filed multiple refund claims seeking cash refund of unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The claims included credit attributable to goods physically exported as well as goods supplied to other EOUs, which are considered ‘deemed exports’ under the Foreign Trade Policy.
The dispute arose concerning the eligibility for cash refund on supplies made to other EOUs for periods from July 2016 to June 2017. The tax authorities – the original authority and the Commissioner (Appeals) – rejected the cash refund for these supplies. Their decision was based on an amendment to Rule 5 of the Cenvat Credit Rules, 2004, which came into effect on March 1, 2015, through Notification No. 6/2015-CE(NT). This amendment inserted clause (1A) in Explanation 1 to Rule 5, defining “export goods” as “any goods which are to be taken out of India to a place outside India.”
