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2015 (2) TMI 301 - AT - Central ExciseRefund of unutilized credit - Availment of cenvat credit of central excise duty paid on inputs and capital goods used in or in relation to manufacture of final product - Closure of factory - Held that - There is no dispute that the appellant s factory stopped production sometime in June, 2007 and at that time there was cenvat credit balance of ₹ 2,35,86,612/- in their RG 23 A part I and RT-23C pt. II account. In the appellants application dated 27.11.2007, cash refund of the above cenvat credit is sought by invoking Section 11 B (2) (C). In our view, section 11 B is only for the refund of the duty paid either through cash or through cenvat credit or of the cenvat credit wrongly reversed. While refund of duty paid either through cash or through cenvat credit account is subject to the bar of unjust enrichment, the refund of wrongly reversed cenvat credit is not subject to the bar or unjust enrichment. But this section cannot be invoked for cash refund of the unutilized cenvat credit lying in the cenvat credit account of a manufacturer at the time of closure of the factory. In fact, other than Rule 5 of the Cenvat Credit Rules, 2004, there is no provision either in Central Excise Act, 1944 or in any Rules made there-under for cash refund of accumulated cenvat credit Rules, 2004. When a factory closes down, the cenvat credit lying unutilized in its cenvat credit account would lapse, unless the factory resumes production. In the event of the factory being taken over by another person, and resuming production, Rule 10 permits the transfer of cenvat credit to the new owner subject to certain conditions. But there is no provision for cash refund of such unutilized credit. Therefore, the Commissioner (Appeals) has rightly upheld the rejection of the cash refund of the accumulated credit. We are supported in our view of the Larger Bench judgment of the Tribunal in the case of Steel Strips (2011 (5) TMI 111 - CESTAT, NEW DELHI). - Decided against assessee.
Issues:
Claim for cash refund of accumulated cenvat credit under Rule 5 of Cenvat Credit Rules, 2004. Analysis: The appellants, manufacturers of Nylon filament yarn, stopped production in June 2007 with accumulated cenvat credit of Rs. 2,35,86,612. They filed a refund claim under section 11B (2)(C) of the Central Excise Act, 1944, seeking cash refund of the unutilized credit. The Commissioner (Appeals) rejected the claim, stating that cash refund under Rule 5 of Cenvat Credit Rules, 2004 is permissible only for credit related to exported goods without payment of duty. The appellant's counsel relied on the Karnataka High Court judgment and Tribunal's decision in Raymond Ltd. case, arguing for cash refund eligibility even when production ceases. The Department defended the rejection, citing the Steel Strips case, emphasizing conditions for cash refund under Rule 5. The Tribunal held that section 11B does not allow cash refund of unutilized cenvat credit at factory closure. It stated that Rule 5 of Cenvat Credit Rules permits cash refund only for credit related to exported goods, subject to specific conditions. As the appellant did not meet these conditions, the rejection of the cash refund claim was upheld. The Tribunal supported its decision with the precedent set by the Larger Bench in the Steel Strips case. In conclusion, the appeal for cash refund of accumulated cenvat credit was dismissed by the Tribunal. The judgment clarified that unless specific conditions under Rule 5 are met, cash refund of cenvat credit is not permissible, especially when a factory ceases production.
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