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2019 (12) TMI 1348 - HC - Central ExciseRefund Claim of CENVAT Credit lying unutilized - Doctrine of unjust enrichment has not been fulfilled - no provision under section 11B of the Central Excise Act, 1944/ Rule 5 of the CENVAT Credit Rules, 2004 to sanction Refund in cash of the unutilized CENVAT Credit lying in CENVAT account on closure of the unit - HELD THAT - As per clause (c) to proviso of Section 11B (2) of the 1944 Act, refund of credit of duty paid on inputs is admissible and only condition is that inputs must be used in accordance with Rules and Notifications issued under the 1944 Act. As per scheme of the Act and Cenvat Credit Rules, 2004 credit of duty paid on inputs is permissible subject to various conditions like inputs must be used directly or indirectly in the manufacture of finished goods; finished goods should be dutiable; inputs must be accompanied with duty paying invoice etc. - In the case in hand, the Appellant-Revenue is not disputing entitlement of credit of duty paid on inputs and dispute is confined to refund of credit already availed and unutilized, thus Respondent-Assessee is entitled to refund of unutilised credit of duty paid on inputs. The Assessee-Respondent has claimed refund of Cenvat Credit which could not be utilised. It is not case of refund of duty paid on finished goods; or duty paid on inputs which formed part of cost of purchase and party did not avail Cenvat Credit. Situation could be different, had it been a case where Assessee did not avail Credit and claimed refund on the ground that duty was paid by mistake. It is case where over the period Respondent took credit of duty paid on inputs but could not use at the time of sale of finished goods. Appeal dismissed.
Issues Involved:
1. Whether the Tribunal's final order sanctioning the refund of unutilized Cenvat Credit is legally correct. 2. Whether the Tribunal's decision aligns with the provisions under Section 11B of the Central Excise Act, 1944 and Rule 5 of the CENVAT Credit Rules, 2004. 3. Applicability of the doctrine of unjust enrichment in the context of refund claims for unutilized Cenvat Credit. Detailed Analysis: Issue 1: Tribunal's Final Order Sanctioning Refund The Appellant-Revenue questioned the legality of the Tribunal's order dated 15.03.2018, which sanctioned the refund of unutilized Cenvat Credit to the Respondent-Assessee. The Tribunal had set aside the order of the first appellate authority and restored the adjudicating authority's decision, which had initially sanctioned the refund. The Tribunal relied on various High Court judgments, including the decision of the Punjab and Haryana High Court in the case of Rama Industries Ltd. vs. CCE, Chandigarh, which supported the refund of unutilized Cenvat Credit upon the closure of the factory. Issue 2: Provisions under Section 11B and Rule 5 The Appellant-Revenue argued that there is no provision under Section 11B of the Central Excise Act, 1944, or Rule 5 of the CENVAT Credit Rules, 2004, that permits a cash refund of unutilized Cenvat Credit. They cited the Larger Bench decision of the Bombay High Court in Gauri Plasticulture P. Ltd. vs. Commissioner of Central Excise, Indore, which held that cash refunds of unutilized Cenvat Credit are not permissible. However, the Respondent-Assessee contended that the Tribunal's decision was justified based on the precedent set by various High Courts, including the Punjab and Haryana High Court, which had sanctioned such refunds. The Tribunal noted that the Respondent-Assessee had complied with all conditions necessary to avail Cenvat Credit and that the refund was justified upon the closure of the factory and surrender of the Central Excise registration. Issue 3: Doctrine of Unjust Enrichment The Appellant-Revenue contended that the doctrine of unjust enrichment should apply, implying that the refund should not be granted if the incidence of duty had been passed on to another person. However, the Tribunal found that the Respondent-Assessee had paid duty on finished goods and had not passed the burden of unutilized Cenvat Credit to any other party. The Tribunal concluded that the issue of unjust enrichment did not arise in this case, as the credit was availed but not utilized. Judicial Precedent and Discipline The Tribunal emphasized the importance of judicial discipline, noting that it is bound by the decisions of the High Courts, particularly the jurisdictional High Court. The Tribunal referenced the decision of the Punjab and Haryana High Court in Rama Industries Ltd., which supported the refund of unutilized Cenvat Credit upon the closure of the factory. The Tribunal also considered similar judgments from the Rajasthan High Court and the Karnataka High Court, which upheld the same principle. Despite the contrary view of the Larger Bench of the Bombay High Court, the Tribunal adhered to the precedent set by its jurisdictional High Court. Conclusion The High Court, after scrutinizing the records and arguments, found no fault in the Tribunal's order. It upheld the Tribunal's decision, emphasizing that the Respondent-Assessee was entitled to the refund of unutilized Cenvat Credit as per the consistent view of different High Courts, including the Punjab and Haryana High Court. The appeal was dismissed, affirming the Tribunal's order dated 15.03.2018.
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