1. This is an appeal filed by M/s. G.T. Exports against the Order-in-Appeal No. 6/06-CE dt. 31.1.06 passed by the Commissioner (Appeals), Coimbatore.
2. Brief facts of the case are as follows. The appellants are engaged in the manufacture of cotton fabrics from the input cotton yarn. They also get fabrics manufactured on job work basis. The appellant is a manufacturer exporter. During February 2005, the appellants claimed refund of Rs. 4,12,400/- being the unutilized CENVAT credit accumulated on account of exports by them. The original authority rejected the refund claim on the ground that the appellants had exported bought out material without subjecting them to any manufacturing process.
Therefore, the CENVAT credit accrued on account of export under bond of such fabrics was not admissible. As no manufacture was involved, the appellants had exported materials procured as such. As there was no manufacture, the goods received were not inputs and the assessee was not eligible for refund of the credit so accumulated under Rule 5 of the CCR, 2002. The Commissioner (Appeals) has sustained the order of the original authority on the same ground.
3. In the appeal, the assessee has mainly taken the ground that the purpose envisaged in Rule 5 of CCR is that inputs brought into the factory is used in the final product, which is cleared for export under bond or under letter of undertaking as the case may be. The expression "used" did not contemplate 'manufacture' resulting in new excisable product. The purpose of the Rule was that the inputs on which credit was taken are used in the export product. Even in processes not amounting to manufacture credit of duty paid on inputs was allowed and the rebate of duty paid on such inputs could be claimed on export of the final product under Central Excise Rule 18 or final product exported under bond without payment of duty under Central Excise Rule 19 of CER 2001. It is stressed that the intention of the Government was not to deny manufacturers/exporters, refund of duty paid on the input contained in the final product.
4. Ld. Counsel for the appellants submits that the appellants had purchased grey cotton fabrics and subjected the same to various processes like scouring, cropping, cutting etc before baling and packing them in export packing. Before exporting them under bond, the various processes the purchased fabrics were subjected to should be considered to constitute manufacture for the purpose of Rule 19 of the Central Excise Rules, 2001. Therefore, the accumulated credit was admissible to the assessee as refund in terms of Rule 5 of the CCR, 2002. Ld. Counsel relies on the decision of this Tribunal in Bala Handloom Exports Co. Ltd. v. CCE in support of his plea that the assessee was eligible for the refund denied to them.
6. I have carefully considered the case records and submissions made by both sides. The appellant is a manufacturer exporter and exports fabrics manufactured using the input cotton yarn. They work under the CENVAT scheme and avail credit of duty paid on yarn and fabrics. The appellant's claim is that they had also exported bought out fabrics after subjecting them to various processes including export finishing and export packing. As a manufacturer exporter, the appellants can also export inputs as such on payment or duty or under bond. For the purpose of export, manufacture need not be an activity envisaged under Section 2(f) of the Central Excise Act, 1944. There is no dispute that the intention of the Government is to promote export and to free the export goods from domestic taxes. In the decision of the Tribunal in Bala Handlooms Exports (supra) cited by the ld. Counsel, it was observed as follows: 9.4 As per the Explanation to erstwhile Central Excise Rules (CER) 12 and Rule 13, 'manufacture' includes the process of blending of any goods or making alterations or any other operation thereon.
Replacing of the CER '44 with CER '2001/02 did not curtail any benefits the trade had enjoyed in relation to export. Moreover if the manufacturer of the impugned goods or a merchant manufacturer were to export them, the exporter would have been granted the duty paid on the fabrics.
Where any inputs are used in the final products which are cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export, the Cenvat credit in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export on payment of duty and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitations as may be specified by the Central Government by notification: Provided that no refund of credit shall be allowed if the manufacturer avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty.
The rule provides for refund of CENVAT credit taken on inputs where for any reason the same could not be utilized for clearing final products for home consumption or export products on payment of duty.
After considering the relevant facts I am convinced that the appellants are eligible for refund of accumulated CENVAT credit in terms of Rule 5 of the CCR. Considering the above legal position I find that the appellants are eligible for the refund of the CENVAT credit claimed. The appeal is allowed.
I do not find any valid reason to deviate from the view taken in the above decision. The appeal filed by M/s. G.T. Exports is allowed.