Per Archana Wadhwa : Being aggrieved with the order passed by the Commissioner (Appeals), Revenue has preferred the present appeal. We have heard Shri K.J. Sanchis, learned JDR, appearing for the Revenue and Shri S. Suriyanarayanan, learned Advocate appearing for the respondent.

2. As per the facts on record, the respondent is a 100% EOU, engaged in the manufacture of copper and copper allied products. They procured the duty paid inputs and availed the benefit of modvat credit in respect of the same. As such, the inputs were used by them in the manufacture of final products, which was cleared to another 100% EOU, as deemed export. As such, the modvat credit availed by them in respect of the duty paid input could not be utilized. Accordingly, they filed the refund claim for un-utilised cenvat credit balance amounting to Rs. 36,41,330/-.

3. After issuance of the show cause notice, the said claim of the respondent was denied by the original adjudicating authority stating that the Rule 5 of the Cenvat Credit Rules, 2004 allowed the refund of un-utilised credit only when the goods stand exported outside the country and not in cases where the final product is cleared to another 100% EOU as deemed credit, in as much as the deemed export cannot be treated at par with physical export.

4. On appeal against the above order, the Commissioner (Appeals) allowed the same by following the Larger Bench decision in case of Amitex Silk Mills Vs. CCE Surat-I 2006 (72) RLT 11 (CESTAT-Del.)=2006 (194) ELT 344 (Tri-Delhi), laying down that the deemed export has all the elements of export and should be treated at par with export. He also referred to the Board's Circular No.220/54/96-CX, dt.4.6.96 [reported in 1996 (15) RLT M1] and allowed the refund claim.

For better appreciation, we reproduce the relevant paragraphs from the Tribunal's decision in case of Amitex Silk Mills and Board's Circular No. 220/54/96-CX, dt.4.6.96 [reported in 1996 (15) RLT M1].

Extract from Tribunal's decision in case of Amitex Silk Mills:

"21. The appellant is an E.O.U. and is entitled to sell in the Domestic Tariff Area (DTA), up to 50% of the F.O.B. value of its exports. The issue raised is whether F.O.B. value of exports takes in the value of all exports or only the value of "physical" exports. In other words, whether 50% is to be computed treating the value of deemed exports also as exports.

22. The provision itself makes no distinction among various types of exports. It refers to 'exports'. Therefore, the terms of the provision, per se, does not call for exclusion of any exports. Deemed exports have all the elements of exports, inasmuch as they are also against competitive international tendering and payment is in foreign exchange. Therefore, on merits also, there is no justification for not treating deemed exports as exports. Looked at from economic efficiency angle, deemed exports should be given higher weightage, inasmuch as while such exports get the seller the benefit of exports, principally, payment in foreign exchange, the Indian buyer saves on freight and other elements of import costs. Thus, deemed export is a beneficial provision for all concerned. A total win win situation. The factor which is inhibiting the revenue would appear to be the mention of 'F.O.B.' value in the provision. I am of the view that this need not stand in the way. F.O.B. is in contrast to C.I.F. value. In other words, value that excludes freight and insurance payable in connection with the export to another country. A deemed export value does not include freight or insurance. Therefore, it is not an inflated value. It is an F.O.B. value."

Extract from Board's Circular No. 220/54/96-CX, dt.4.6.96:

"2. The matter has been examined by the Board. Cash refund of the unutilised Modvat credit is an incentive given to manufacturers and exporters and non-grant of such claim will affect the competitiveness of the Indian industry in the International market. Accordingly I am directed to say that all