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2016 (11) TMI 472 - AT - Central Excise100% EOU - rejection of refund claim - Rule 5 of the Cenvat Credit Rules 2004 - the appellant has submitted that their unit had closed its manufacturing activity during August 2005 itself. Since they are not manufacturing and clearing any product on payment of duty, they are not able to utilise the CENVAT account. Therefore they have prayed that the amount be refunded to them in cash only. Held that - The jurisdictional High Court of Karnataka in the case of Union of India V. Slovak Trading Co. Pvt. Ltd. 2006 (7) TMI 9 - KARNATAKA HIGH COURT has clearly held that there is no express prohibition in terms of Rule 5. The Hon ble High Court has observed that the Tribunal is fully justified in ordering refund partly in the light of the closure of the factory and in the light of the assessee coming out of modvat scheme and this judgment of the Hon ble High Court was affirmed by the Hon ble Supreme Court. Further the judgment of the Hon ble High Court has been followed in number of cases by various Tribunals as cited supra. On the other hand the judgments relied upon by the learned AR is not applicable in the facts and circumstances of the present case when the jurisdictional High Court has allowed the refund of unutilized cenvat credit under Rule 5 of the Cenvat Credit Rules 2004 and the same has been affirmed by the Hon ble Supreme Court - the impugned judgment is not sustainable in law and is hereby set aside by allowing the appeal of the appellant with consequential relief of interest to be quantified and paid by the adjudicating authority - appeal allowed.
Issues:
- Refund of duty payment demanded by audit party - Rejection of refund by Commissioner (A) - Appeal before CESTAT, Bangalore - Sanctioning of refund by Asst. Commissioner - Appeal against Asst. Commissioner's order Refund of duty payment demanded by audit party: The appellant, engaged in manufacturing electronic goods, faced a demand for duty payment of ?22,21,477 by the audit party, which was paid under protest. A refund was sought under Section 11B of the Central Excise Act, 1944, after the payment. Rejection of refund by Commissioner (A): The Commissioner (A) upheld the Order-in-Original and rejected the appeal for refund, leading to the appellant filing an appeal before CESTAT, Bangalore. Appeal before CESTAT, Bangalore: CESTAT, Bangalore set aside the Order-in-Appeal, prompting the appellant to file an application for sanctioning the refund claimed earlier, which was partially granted by the Asst. Commissioner. The appellant, dissatisfied with the order, filed an appeal before the Commissioner (A). Sanctioning of refund by Asst. Commissioner: The Asst. Commissioner sanctioned a refund of ?4,21,477 by cash rebate and ?18 lakhs by CENVAT credit, without interest on the claimed refund amount, leading to the appellant's appeal before the Commissioner (A). Appeal against Asst. Commissioner's order: The appellant contended that the impugned order lacked legal sustainability, emphasizing that the Commissioner (A) had disregarded relevant judicial decisions. The appellant relied on various judgments, including the Hon'ble Karnataka High Court's ruling in a specific case. The appellant argued that the closure of their manufacturing unit justified a cash refund of unutilized CENVAT credit, citing the absence of manufacturing activity as the reason for non-utilization. The appellant referenced the judgment of the Hon'ble Karnataka High Court, affirmed by the Supreme Court, to support their claim for refund under Rule 5 of the Cenvat Credit Rules 2004. In contrast, the learned AR contended that unutilized CENVAT credit would lapse upon business closure, citing several authorities to support this view. However, the presiding Judicial Member noted that the judgments cited by the AR were not applicable in the present context, given the specific ruling of the jurisdictional High Court allowing the refund under Rule 5. The Judicial Member, after considering the arguments and relevant legal provisions, set aside the impugned order, allowing the appeal of the appellant. Additionally, the Judicial Member directed the adjudicating authority to quantify and pay interest to the appellant, following the precedent set by the Hon'ble Supreme Court regarding interest on delayed refunds. This comprehensive analysis of the legal judgment highlights the key issues, arguments presented by both parties, relevant judicial decisions, and the final decision rendered by the Judicial Member, ensuring a thorough understanding of the case.
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