2015 (6) TMI 1220 - AT - Central Excise

Refund of CENVAT Credit in cash - credit already utilized for payment of Central Excise duty - HELD THAT - Cenvat credit originally used by them for payment of duty is liable to be restored in their Cenvat account, once the appellant has subsequently paid the duty in cash. The accumulated Cenvat credit cannot be allowed to a manufacturer, on the closure of their factory inasmuch as there is no provision for refund of such unutilized accumulated credit, in the Cenvat credit Rules. Accumulative reading of the said rules leads to conclude that the credit so availed by an assessee can be used for payment of duty or the final product. It is not a case where such credit was available to the appellant for utilization. As such in the absence of any provision for refund of such accumulated credit, the refund of such credit cannot be allowed in cash - Appeal dismissed - decided against appellant.

Summary

Issues:
1. Duty payment through Cenvat credit account vs. account current.
2. Refund claim for accumulated unutilized credit amount.

Analysis:
1. The appellant, engaged in manufacturing Cotton yarn and Polyester yarn, paid duty by debiting the same out of the Cenvat credit account during 2000-2001 & 2001-2002, although they were required to discharge duty liability through account current as per Rule 49(1)(E) of Central Excise Rules, 1944. Show-cause notice was issued, leading to an Order-in-Original confirming duty demand, penalty, and interest. The appellant paid the confirmed amount in 2009 but disputed the refund of accumulated unutilized credit amount of &8377; 5,91,650, which was rejected by lower authorities citing no provision for such refund in cash and the claim being time-barred. The appellant argued for cash refund due to factory closure, but the appellate authority held that credit restoration in the Cenvat account was appropriate, as no provision allowed cash refund for unutilized credit.

2. The Tribunal found no dispute on the duty payment in cash and agreed that the appellant should have discharged duty liability through the account current instead of Cenvat credit. However, the appellant sought a refund of the Cenvat credit used for duty payment in cash. The Tribunal noted that the accumulated Cenvat credit couldn't be refunded in cash upon factory closure, as per Cenvat credit Rules. Refund in cash would negate the subsequent cash duty payment, defeating the legislative requirement of paying duty on the final product in cash. The Tribunal emphasized that refunding the credit in cash would lead to a situation where no excise duty was paid in cash, contrary to legal provisions. Thus, the Tribunal upheld the lower authorities' decision, denying the cash refund of the accumulated unutilized credit amount.

In conclusion, the Tribunal rejected the appeal, stating that the accumulated and unutilized credit amount cannot be refunded in cash to the appellant, as it would contradict the duty payment requirements and legislative provisions. The judgment emphasized the necessity of adhering to the prescribed duty payment methods and disallowed the cash refund claim for the unutilized credit amount, maintaining the integrity of excise duty payment regulations.