No refund of accumulated credit for ICB Supplies :

THE recent Central Excise Tariff Conference deliberated on the issues of refund of accumulated CENVAT Credit in relation to EOUs and International Competitive Bidding (ICB) supplies. And the verdict is against the assessees.

The Coimbatore Zone raised an issue that it would be desirable to provide completely duty free procurement of raw materials (zero rating) for use in the manufacture of goods to be supplied against ICB to mega power/ultramega power projects. While the main units/sub-contractors are entitled to exemption under notification no. 12/2012-CE dated 17.03.2012, the vendors who supply materials to such main units/sub-contractors do not get any exemption from payment duty. This leads to accumulation of credit with main units/sub-contractors. Cenvat credit so accumulated should be allowed refund under Rule 5 of the Cenvat Credit Rules, 2004.
It was decided that :the provisions of refund of accumulated credit under rule 5 of the CENVAT Credit Rules, 2004 are only meant for physical exports and not for deemed exports with one exception i.e. supplies to SEZs which is treated as exports. The meaning of the expression export goods has been inserted in the rule 5 of CCR, 2004 by notification no. 6/2015-C.E(N.T) dated 1.3.2015 to say that export goods means any goods which are to be taken out of India to a place outside India.Thus, supplies to EOU and supplies under ICB can not avail the benefit of refund of accumulated credit under rule 5. Under the present policy, it would not be possible to allow refund of accumulated credit on supplies to ICB.
No refund of accumulated credit for EOU Supplies :
The Hyderabad Zone raised a similar issue: It is pertinent to mention that conceptually SEZs and EOUs merits to be equated and supplies to EOUs may also have to be treated as Exports (Deemed exports as per FTP), but for the recent incorporations of the definition of “Export Goods“. The terms exports, prior to incorporation of the definition, was interpreted in several judicial pronouncements to include deemed exports. In a similar situation in respect of SEZs, Board vide Circular 1001/8/2015-CX.8 dated 28.04.2015 has clarified that all supplies to SEZ should be treated as exports. However, the said circular did not cover the supplies to EOU. Clarification is needed regarding benefit under Rule 5 of the Cenvat Credit Rules, 2004 for supplies to EOUs.
The Decision:The issue is identical to the issue of extending benefit of refund under rule 5 of the Cenvat Credit Rules, 2004, for supplies made under International Competitive Bidding discussed in the foregoing paragraphs. The conference noted that the benefit of refund of accumulated credit under rule 5 of CCR, 2004 is not admissible for supplies to EOUs. Even prior to the amendment to the Rule, EOUs were not eligible for such benefit though it was extended in some of the cases by Hon’ble courts. The definition of export goods has now been incorporated in the rules removing confusion and ambiguity. With reference to SEZ, it was noted that SEZ Act, 2005, has an overriding application over other Acts including the Customs Act and therefore benefit of refund of accumulated credit is available for supplies of goods to SEZ. The present policy is to not allow the benefit of refund of accumulated credit for supplies to EOU.
But why? What is the logic behind this policy? Is it a simple habit with the babu that come what may, I will not give refund? Isn’t the Board living in some archaic age where CENVAT credit is allergic? Are they fit to run the GST regime with the rejection of genuine small entitlements of the assessees? If they can give the refund for SEZ, why not for the EOU?Babucracy is the only logic.