2011 (9) TMI 964 - HC - Customs

Refund claim - Rule 5 of the CCR 2004 - credit remain unutilized and operations wound up and also registration certificate was cancelled - Held that - On a true and fair construction of the provision as well the Rule entitles the manufacturer to refund of the Cenvat Credit where for any reason such adjustment is not possible the manufacturer shall be allowed refund of such amount subject to such safeguards conditions and limitations as may be specified by the Central Government by notification - No notification of the Central Government setting out safeguards conditions and limitations for the refund in case of closure of the unit has been placed on record either before the Appellate Authority the further Appellate Authority the Tribunal or even before us - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal by revenue under Section 35(G) of the Customs Act, 1962 against CESTAT's order
- Refund of Cenvat Credit accumulated on exports under Rule 5 of Cenvat Credit Rules, 2004
- Interpretation of Rule 5 in the context of closure of operations and refund claims
- Application of Tribunal's decision in Gauri Plasticulture case
- Absence of specific safeguards, conditions, and limitations for refund in case of unit closure

Analysis:
The judgment pertains to an appeal by the revenue under Section 35(G) of the Customs Act, 1962 against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Bangalore. The respondent, a manufacturer of bulk drugs, operated under the Cenvat scheme, exported finished goods, and claimed refund of Cenvat Credit accumulated on exports as per Rule 5 of the Cenvat Credit Rules, 2004. The assessee surrendered its registration certificate after winding up operations, and refund claims for four quarters were allowed by the Original Authority, leading to appeals by the revenue before the Commissioner (Appeals) and subsequently before the CESTAT.

The CESTAT, in dismissing the appeals, relied on the Karnataka High Court's judgment in a similar case involving the interpretation of Rule 5, where it was held that Cenvat Credit is permissible in case of closure and refund claims. The Tribunal's decision in Gauri Plasticulture case was also cited, emphasizing that if an assessee is unable to utilize credit due to departmental objections or actions, refund becomes admissible. However, the absence of specific safeguards, conditions, and limitations for refunds in case of unit closure was noted.

The Court analyzed Rule 5 of the Cenvat Credit Rules, 2002, which allows for refund of Cenvat Credit when adjustment is not possible, subject to safeguards specified by the Central Government. The judgment highlighted the lack of such notifications setting out conditions for refunds in case of unit closure, emphasizing the entitlement of manufacturers to refunds under the rule. Consequently, the Court found no substantial question of law for consideration and dismissed the appeal at the admission stage, without costs.