2016 (12) TMI 1376 - AT - Central Excise

Refund claim u/r 5 - assessee opted to avail full exemption by filing N/N.30/2004-CE dated 09/07/2004 w.e.f. 16/03/2005. At the time of opting out, the appellant had credit of AED (TTA) of ₹ 14,73,718/- to their credit - refund claim filed placing reliance on the case of Slovak India Trading Co. Pvt. Ltd. 2006 (7) TMI 9 - KARNATAKA HIGH COURT where it was observed that Rule 5 of the Cenvat Credit Rules, 2002 does not expressly prescribed refund of unutilized credit where there was no manufacture in the light of closure of factory. Held that - in terms of the decision of larger bench, which has been given after examining the Decision of Hon ble High court in case of Slovak, the respondents are not entitled to refund of accumulated credit lying in their accounts unless they are able to show that they are fulfilling the conditions prescribed u/r 5 of the Cenvat Credit Rules and the notification issued there under. The respondents have not done so - respondent not eligible for refund - appeal allowed - decided in favor of Revenue.

Summary

Issues Involved:
1. Refund claim under Rule 5 of the Cenvat Credit Rules, 2004.
2. Limitation period for claiming refund.
3. Admissibility of refund of unutilized/accumulated Cenvat credit on closure of unit.
4. Binding nature of previous favorable orders not challenged by Revenue.
5. Doctrine of merger and its applicability.
6. Restitution of amounts refunded upon reversal of Tribunal’s order.

Detailed Analysis:

1. Refund Claim under Rule 5 of the Cenvat Credit Rules, 2004:
The respondent, M/s. Hindoostan Spinning & Weaving Mills Ltd., opted for full exemption under Notification No. 30/2004-CE and filed a refund claim of AED (TTA) credit of ?14,73,718/- under Rule 5. The original adjudicating authority rejected the claim, but the first appellate authority allowed it. The Revenue appealed, arguing that Rule 5 permits refund only in certain conditions, primarily for export of finished goods. The Tribunal referenced the larger bench decision in Steel Strips Vs. CCE, Ludhiana, which held there is no provision for refund of unutilized/accumulated Cenvat credit on closure of unit.

2. Limitation Period for Claiming Refund:
The Revenue contended that the refund claim filed on 12/03/2007 for credit as on 16/03/2005 was barred by limitation. They cited ONGC Vs. CST, Mumbai, asserting that non-mention of limitation in the show-cause notice does not preclude authorities from examining it.

3. Admissibility of Refund of Unutilized/Accumulated Cenvat Credit on Closure of Unit:
The respondent relied on Slovak India Trading Co. Pvt. Ltd., where the Karnataka High Court allowed refund on closure of the unit. The Tribunal noted that the High Court observed Rule 5 does not expressly prohibit refund of unutilized credit on closure. However, the Tribunal emphasized the larger bench's decision in Steel Strips, which requires fulfillment of conditions under Rule 5 for refund, which the respondent did not meet.

4. Binding Nature of Previous Favorable Orders Not Challenged by Revenue:
The respondent argued that since the refund was sanctioned in 2009 and not challenged by Revenue, it could not be recovered. The Tribunal referenced Woodcraft Products Ltd., where the Supreme Court held that upon reversal of a Tribunal’s order, the assessee must restitute the refunded amounts, irrespective of the limitation period.

5. Doctrine of Merger and Its Applicability:
The Tribunal discussed the doctrine of merger, citing Kunhayammed v. State of Kerala, explaining that the doctrine applies when a higher court modifies, reverses, or affirms a decision. The Tribunal clarified that non-filing of an appeal by Revenue in similar cases does not bar scrutiny in another case, as held in CCE, Raipur v. Hira Cement.

6. Restitution of Amounts Refunded Upon Reversal of Tribunal’s Order:
The Tribunal concluded that the respondent must restitute the refunded amount as per the Supreme Court’s decision in Woodcraft Products Ltd., which mandates restitution upon reversal of the Tribunal’s order.

Conclusion:
The Tribunal allowed the Revenue’s appeal, emphasizing that the respondent did not fulfill the conditions under Rule 5 for refund of unutilized credit, and the refund claim was barred by limitation. The Tribunal also held that the respondent must restitute the refunded amount following the reversal of the Tribunal’s order.