An Export Oriented Unit is entitled to refund of excise duty paid on exported goods, even if the goods are exempted from duty, if it may not be of use to the petitioner if the rebate amount is kept in credit due to the absence of local sales.

1. Heard the learned counsel appearing for the petitioner, as well as the learned counsel appearing on behalf of the respondents 1, 2 and 4.

2. It has been stated that the petitioner is a 100% Export Oriented Unit, engaged in the manufacture of export of bulk drugs and formulations. The petitioner is a registered manufacturer and it is liable to pay Excise Duty on the bulk drugs and formulations manufactured by it, unless such payment is specifically exempted.

3. It has been further stated that the Government of India has announced various exemptions from the payment of Excise and Customs Duty payable on the raw materials and consumables used in the manufacture of export products, by a 100% Export Oriented Unit. Concessional rate of duty is also granted for the sale of the finished products in the Domestic Tariff Area, on fulfillment of the export obligation. While so, the Government of India had introduced the levy of Service Tax on taxable services, under Chapter 5 of the Finance Act, 1994. Even though the Government of India had granted exemption from the payment of Customs and Central Excise Duties on the capital goods, raw materials and consumables supplied to a 100% Export Oriented Unit, no such exemption had been granted in respect of the payment of Service Tax. Hence, the petitioner is liable to pay the Service Tax on the services received by them and used in the manufacture of the goods exported by the petitioner and in respect of the goods allowed to be cleared in the Domestic Tariff Area.

4. It has been further stated that the Government of India had introduced a scheme of credit, in respect of the Indirect Taxes, including Service Tax paid on the capital goods, inputs and input services used by the manufacturer of excisable goods, under the CENVAT Credit Rules, 2004. As the benefit of availing credit, under the CENVAT Credit Rules, 2004, is available for an 100% Export Oriented Unit, the petitioner had taken credit of the service paid on the input services received and used by them in the manufacture of bulk drugs and formulations. As per the scheme contemplated under the CENVAT Credit Rules, 2004, a manufacturer can utilize the credit of duties or service tax paid on the capital goods, inputs and input services for payment of excise duty on the final products cleared for home consumption. As Excise Duty is not payable on exports there is an accumulation of the duties and the taxes paid on the inputs and input services. Such credit could be used for payment of Excise Duty on other manufactured excisable goods cleared in the Domestic Tariff Area. The rules also provide for the refund of the accumulated credit, subject to the time limit prescribed under the rules.

5. It has been further stated that Rule 18 of the Central Excise Rules, 2002, provides for the grant of rebate of duty paid on excisable goods which are exported and on such duty paid on materials used in the manufacture or processing of such goods, by way of a notification issued by the Central Government. Thus, a manufacturer, as an exporter, can either claim refund of the duties and the Service Tax paid on the inputs and input services used in the manufacture of the export goods, under Rule 5 of the CENVAT Credit Rules, 2004, or pay the duty on the final products exported, by utilizing the credit and claim rebate of the duty so paid.

6. It has been further stated that the sales made by the petitioner, which is a 100% Export Oriented Unit, are predominantly by way of exports. As the petitioner was required to procure the input services on payment of Service Tax it had been compelled to avail the benefit of CENVAT credit of the Service Tax so paid. Instead of exporting the goods without payment of duty and claiming refund of the service tax paid on the input services, the petitioner had chosen to export the goods on payment of the applicable duty of excise leviable thereon and sought rebate of the duty so paid, in terms of Rule 18 of the Cent