2019 (3) TMI 974 - AT - Central Excise

CENVAT Credit of differential duty - Refund - price increase on goods stock transferred during the quarter April 2008 to June 2008 - closure of factory - Held that - The accumulation of CENVAT Credit in the CENVAT account is done over a period of time by a manufacturer by taking Credit of the duty suffered on inputs, capital goods and eligible input services. Thus, this Credit balance is built up and assiduously gathered over time. In the normal course, this Credit would have been utilized towards discharge of duty liability on goods that may be manufactured and cleared or taxable services provided/received. The closure of the factory should not be allowed to snatch away that amount from the manufacturer. The availment of CENVAT Credit and its utilization is akin to a fundamental right in the area of indirect taxation. It has been time and again reiterated that CENVAT Credit is as good as a cash balance, to be utilized for the discharge of duty liability in lieu of actual cash. If a factory of a manufacturer has closed down for no fault of theirs, the unutilized Credit, which rightfully belongs to the manufacturer, cannot be denied to them when claimed by way of refund. The issue in dispute is no longer res integra and it has now been conclusively settled by both the Hon ble High Court and the Hon ble Apex Court that pursuant to closure of a factory, the manufacturer can avail refund claim for the unutilized CENVAT Credit lying in the balance. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim of cash refund for unutilized CENVAT Credit under Section 11B of the Central Excise Act, 1944.

Analysis:
The appellant, a manufacturer of lubricating oils, availed CENVAT Credit but could not fully utilize it due to the closure of their unit. They filed a refund claim which was rejected by the Original Authority, and the rejection was confirmed by the Commissioner (Appeals). The appellant appealed to the forum of CESTAT Chennai.

The appellant's consultant argued that the Hon'ble High Court of Karnataka and the Hon'ble Supreme Court had upheld that there is no express prohibition for refund of unutilized CENVAT Credit upon factory closure. They cited relevant judgments supporting the eligibility of refund claims in such cases.

The respondent's representative contended that the courts should only interpret unclear language, emphasizing the clarity of Section 11B regarding refund claims.

After hearing both sides, the Tribunal noted that the accumulation of CENVAT Credit over time is a fundamental right in indirect taxation, akin to a cash balance for duty liability discharge. The closure of a factory should not deprive the manufacturer of their rightful unutilized Credit.

The Tribunal criticized the lower authorities for not considering the precedents set by the Hon'ble High Courts and the Hon'ble Supreme Court, which established the eligibility of refund claims for unutilized Credit upon factory closure. The Tribunal held that the issue is conclusively settled by the higher courts, allowing manufacturers to claim refunds in such situations.

Consequently, the Tribunal set aside the impugned Order, allowing the appeal with any consequential benefits as per law.

In conclusion, the judgment emphasized the importance of honoring the rights of manufacturers to claim refunds for unutilized CENVAT Credit upon the closure of their factories, citing relevant legal precedents that supported this position.