2012 (4) TMI 521 - AT - Central Excise

Denial of refund - Refund frozen by the assessee - lower authorities have held that assessee cannot be granted refund in cash, as the assessee s factory has closed down and there is no provision for refunding the amount in cash for such freezing amount in RG23 Part-II - Held that - Madvat law has codified procedure for adjustment of duty liability against Modvat Account. That is required to be carried out in accordance with law and unadjusted amount in not expressly permitted to be refunded. In absence of express provision to grant refund, that is difficult to entertain except in the case of export. There cannot be presumption that in the absence of debarment to make refund in other cases that is permissible. Refund results in outflow from treasury, which needs sanction of law and an order of refund for such purpose is sine qua non. Law has only recognized the event of export of goods for refund of Modvat credit as has been rightly pleaded by Revenue and present reference is neither the case of otherwise due of the refund nor the case of exported goods. Similarly absence of express grant in statute does not imply ipso facto entitlement to refund. So also absence of express grant is an implied bar for refund. When right to refund does not accrue under law, claim thereof is inconceivable. Following decision of Steel Strips vs. CCE, Ludhiana 2011 (5) TMI 111 - CESTAT, NEW DELHI - Decided against assessee.

Summary

Issues involved:
Denial of refund of frozen amount by the assessee, interpretation of provisions for refund in RG23 Part-II, applicability of Larger Bench decision on refund of unutilized credit.

Analysis:

Issue 1: Denial of Refund
The case revolved around the denial of a refund of Rs. 1,00,050/- by the assessee, which was frozen on the directions of the Tribunal. The freezing was done in 1998, and after the matter was decided in favor of the assessee by the Tribunal, a refund claim was filed. Both lower authorities held that the assessee could not be granted cash refund as the factory had closed down, and there was no provision for refunding such frozen amounts in RG23 Part-II.

Issue 2: Interpretation of Provisions for Refund
The Tribunal analyzed the issue in light of a Larger Bench decision in the case of Steel Strips vs. CCE, Ludhiana. The Larger Bench decision emphasized that the law has codified procedures for the adjustment of duty liability against Modvat Account, and unadjusted amounts are not expressly permitted to be refunded. It was stated that refunding amounts results in an outflow from the treasury, requiring legal sanction and an order of refund. The Tribunal highlighted that the right to refund does not accrue under the law unless specifically provided, and the absence of an express grant in the statute implies a bar for refund. The decision clarified that refund of unutilized credit is only permissible in the case of export of goods and not for other reasons.

Issue 3: Applicability of Larger Bench Decision
Based on the Larger Bench decision, the Tribunal found that the lower authorities were correct in rejecting the refund claim filed by the assessee. The Tribunal concluded that the claim for refund of unutilized credit could not be entertained in the absence of specific provisions allowing such refunds, except in the case of export of goods. Therefore, the appeal was rejected in favor of the Revenue.

In conclusion, the judgment upheld the denial of the refund claim by the assessee based on the legal principles outlined in the Larger Bench decision, emphasizing the necessity of statutory provisions for granting refunds and restricting refund of unutilized credit to specific circumstances like export of goods.