2016 (1) TMI 1057 - AT - Central Excise

Refund of unutilised Cenvat credit - refund claim denied on the ground that in terms of Rule 11(2) of Cenvat Credit Rules, 2004, unutilised credit would lapse on closure of the unit - Held that - Admittedly, in the present case the appellant has closed its unit and filed ER return claiming refund of unutilised Cenvat credit which he is entitled to as per Rule 5 of the Cenvat Credit Rules, 2004. The rejection of refund claim by the ld. Commissioner is on account of misinterpretation of the rules governing the refund. The ER return submitted by the appellant along with refund application is sufficient to grant refund to the appellant. The judgments cited at the bar by the ld. counsel for the appellant are fully applicable in the facts and circumstances of this case. In view of the facts and circumstances enumerated, set aside the impugned order and direct the respondent to grant refund within a period of two months from the receipt of the certified copy of the order. - Decided in favour of assessee.

Summary

Issues:
Refund of unutilised Cenvat credit upon closure of factory.

Analysis:
The appeal concerned the rejection of a refund application by the ld. Commissioner under Rule 11(2) of Cenvat Credit Rules, 2004, stating that unutilised credit would lapse upon closure of the unit. The appellant, engaged in manufacturing excisable goods, closed operations due to commercial non-viability and sought a refund of unutilised Cenvat credit amounting to Rs. 85974. The appellant contended that the Commissioner's order misinterpreted the law and highlighted that the ER return submitted with the refund application demonstrated the unutilised credit balance. The appellant relied on legal precedents, including a Karnataka High Court decision and an Apex Court ruling, supporting the refund claim in cases of factory closure.

The appellant also cited various tribunal decisions emphasizing the refund of unutilised credit upon factory closure, further strengthening their argument. The ld. AR, representing the respondent, maintained that the unutilised credit would lapse upon business closure and pointed out the alleged lack of necessary documents to support the refund claim. The Tribunal analyzed Rule 5 of Cenvat Credit Rules, 2004, which outlines the refund of Cenvat credit, and found that the appellant's closure of the unit entitled them to the refund as per the rule's provisions. The Tribunal concluded that the Commissioner's rejection was based on a misinterpretation of the refund rules, and the ER return submitted by the appellant was sufficient evidence to grant the refund. Consequently, the Tribunal set aside the impugned order and directed the respondent to process the refund within two months from the date of the order.

The judgment highlighted the legal framework governing Cenvat credit refunds, the appellant's entitlement to the refund upon factory closure, and the misinterpretation leading to the initial rejection. By considering relevant legal precedents and the specific provisions of Rule 5, the Tribunal upheld the appellant's claim for refund of unutilised Cenvat credit, emphasizing the importance of adhering to the law's provisions in such cases.