2026-VIL-1768-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – CENVAT Credit – Refund under Rule 5 of CENVAT Credit Rules, 2004 of Unutilised Credit on Clearances to 100% Export Oriented Unit as Deemed Export – Appellant, a manufacturer of hydraulic motor parts, cleared the final products to a 100% Export Oriented Unit without payment of duty under the notification, and also cleared them to customers in the Domestic Tariff Area – Refund of CENVAT credit on inputs used in the manufacture was sanctioned by the original authority, but the Commissioner (Appeals) allowed the Revenue's appeals, and the recovery of the refunds sanctioned was confirmed in the protective show cause notices – Appellant contended that clearances to a 100% EOU are deemed export and that Explanation (1A) to Rule 5 was inserted only with effect from 01.03.2015, after the period in dispute – Revenue contended that clearance to an EOU is only a legal fiction and not export for Rule 5, and relied on the decision of the jurisdictional High Court in BAPL Industries Ltd. v. Union of India – Whether the authorities below were justified in rejecting the refund claims under Rule 5 of CENVAT Credit Rules, 2004 – HELD – The issue is no more res integra. In JBM Auto Limited v. CCE Noida, the coordinate Bench followed the decision of the Allahabad High Court in the assessee's own case and the decision of the Gujarat High Court in Commissioner of Central Excise and Customs v. NBM Industries, and held that clearance to a 100% EOU is deemed export entitling the assessee to refund of unutilised CENVAT credit under Rule 5. The Gujarat High Court decision, followed in E.I. Dupont India Pvt. Ltd. v. Union of India, had not been challenged further and is conclusive and final. A sale to a 100% EOU is virtually in the nature of export, since such a unit cannot sell its products in the local market and is obliged to export its entire production. Export takes into its fold deemed export as well, and no distinction can be drawn between export and deemed export. BAPL Industries Ltd. examined the vires of the CBEC Circular vis-a-vis export and deemed export in the context of the EXIM Policy. That is an altogether different dispute from the present one, and the decision was distinguished by both the Allahabad and Gujarat High Courts – Denial of refund as upheld in the impugned common order cannot be sustained, the same is set aside, and the appeals are allowed with consequential benefits, if any, as per law
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