CENVAT Refunds For Deemed Exports Barred After One Year from End of Claim Period: Bombay High Court

The Bombay High Court's Nagpur Bench has recently held that a refund claim for unutilised CENVAT credit linked to deemed exports must be filed within the one-year time limit prescribed under Section 11B of the Central Excise Act, which governs refund claims under excise law.

The court said this limitation applies even when the refund is sought under Rule 5 of the CENVAT Credit Rules, which allows exporters to seek a refund of credit that cannot be utilised.

A Division Bench of Justice Anil L. Pansare and Justice Nivedita P. Mehta dismissed an appeal filed by Inventys Research Co. Pvt. Ltd., affirming the CESTAT's view that such refund claims are subject to the limitation under Section 11B.

Explaining how the limitation period must be computed, the court said, “We find that relevant date for the purpose of Section 11B will be the last day of period for which refund is claimed.”

Inventys Research is a 100% export-oriented unit that supplied goods to another export-oriented unit, Hikal Ltd., between October 2009 and September 2010.

On March 17, 2011, the company applied for a refund of unutilised CENVAT credit under Rule 5 for four quarters beginning October 2009. While the tax department allowed refunds for the later quarters, it rejected the claim for the October to December 2009 quarter, holding that it had been filed beyond the permissible period.

Before the High Court, the company argued that Rule 5 does not prescribe any specific limitation period and that its refund application had been filed within a reasonable time.

It urged the court to adopt a flexible approach where the rules were silent. The tax department opposed this, pointing to the government notification governing Rule 5 refunds, which permits claims to be filed on a monthly basis but expressly makes them subject to the limitation under Section 11B.

Rejecting the plea for flexibility, the High Court held that the statutory framework itself fixes the outer limit and leaves no scope for extending deadlines.

“The relevant date, in the present case, will be 31.12.2009. The period of one year will conclude by 31.12.2010. The application is filed in March, 2011. The same is, therefore, barred by limitation. Appellate Tribunal has correctly held that refund claimed on cenvat credit pertaining to deemed export of goods under Rule 5 of the Credit Rules for the quarter October to December 2009 is hit by bar of limitation under Section 11B of the Act of 1944. The substantial question of law is accordingly answered in the affirmative,” the bench said, as it dismissed the appeal.

For Appellant: Advocate Y. Patki with Advocate V. S. Uberoi

For Respondent: Advocate S. N. Bhattad