2005 (10) TMI 171 - AT - Central Excise

Summary

Issues involved:
The issue involved in this case is the eligibility of refund claims of Modvat credit availed by the appellant for the clearance of textile fabrics to 100% EOU under bond, in accordance with Rule 5 of Cenvat Credit Rules, 2001, read with Section 11B of Central Excise Act.

Summary:

1. Refund Claims Allowed by Assistant Commissioner:
The Assistant Commissioner allowed the refund claims of Modvat credit availed by the appellant for Rs. 1,52,265/- and Rs. 87,585/- for January and February 2002, respectively, as the appellant was unable to utilize the credit against goods exported under bond due to low clearances and duty paid exports.

2. Challenge by the Department:
The Department challenged the refund claims before the Commissioner (Appeals), arguing that Modvat credit on inputs was only permissible for actual exports, not for clearances to 100% EOU deemed as exports, citing definitions from the Customs Act and Export Import Policy.

3. Decision of Commissioner (Appeals):
The Commissioner (Appeals) accepted the Department's contention, referring to a Tribunal decision and held that Modvat credit for deemed exports to 100% EOU was not allowable as refund.

4. Appellant's Contention:
The appellant argued that the definition of export under the Excise Act was absent, and therefore, clearances to 100% EOU should be considered as exports. They also contended that Rule 5 applied to inputs used in final products cleared for export under bond, thus justifying the refund.

5. Tribunal's Decision:
The Tribunal found that clearances to 100% EOU could not be equated with actual exports, as per the Customs Act definition, and upheld the decision that Modvat credit refund was not applicable to deemed exports. However, considering Rule 5, the Tribunal remanded the matter for verification of whether the goods were ultimately exported for a final decision.

In conclusion, the Tribunal allowed the appeal by way of remand for further verification and decision by the original adjudicating authority.