Clearances to 100% EOUs qualify as deemed exports for Rule 5 CENVAT credit refunds.

The appellant manufactured hydraulic motor parts and cleared goods to a 100% Export Oriented Unit (EOU) without payment of duty under Notification No. 22/2003-CE, while also making domestic clearances.

It claimed refunds under Rule 5 of the CENVAT Credit Rules, 2004, for credit on inputs used in manufacture.

Although the refunds were initially sanctioned, the Commissioner (Appeals) allowed the Department’s appeals, and recovery of the refunds was confirmed.

The appellant’s appeals against that decision were before the Tribunal.

The disputed period was October 2011 to March 2015.

1. Whether clearances to a 100% EOU, made without payment of duty, qualify as deemed exports for purposes of refund of unutilised CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004.

2. Whether the decision in BAPL Industries Ltd. v. Union of India governed the refund issue raised in these appeals.

Rule 5 of the CENVAT Credit Rules, 2004, provides for refund of unutilised CENVAT credit subject to its terms.

The Tribunal followed the Gujarat High Court decisions in Commissioner of Central Excise & Customs v. NBM Industries, 2012 (276) E.L.T. 9 (Guj.), and E.I. DuPont India Pvt. Ltd. v. Union of India, 2014 (305) E.L.T. 282 (Guj.), as well as the Allahabad High Court’s decision in the appellant’s own case, which supported treating supplies to a 100% EOU as deemed exports for Rule 5 refund purposes.

It also relied on the Tribunal’s decision in JBM Auto Ltd. v. CCE, Noida, Final Order No. 70368/2024, which followed those authorities.

The Tribunal distinguished BAPL Industries Ltd. v. Union of India, 2007 (211) E.L.T. 23 (Mad.), as concerning the validity of a CBEC circular in the context of the EXIM Policy, rather than entitlement to a Rule 5 refund.

The Tribunal considered the issue settled by the authorities followed in JBM Auto.

Those decisions treated supplies to a 100% EOU as deemed exports for purposes of refund of unutilised CENVAT credit.

The Tribunal found BAPL Industries inapplicable because it dealt with a different issue and had been distinguished by the Gujarat and Allahabad High Courts.

On that basis, it held that the rejection of the appellant’s refunds could not stand.

The Tribunal set aside the impugned common order, and allowed the appeals with consequential benefits, if any, in accordance with law.