2009 (2) TMI 136 - HC - Central Excise

Refund Cenvat Credit Closer of Manufacturing Unit Appellant seeks refund of unutilized balance of cenvat credit at the time of closer of manufacturing unit tribunal rejected the claim of refund Held that refund is allowed to the appellant in view of various decisions.

Summary

Issues:
1. Whether refund in cash of Cenvat credit can be allowed in case of closure of the manufacturing unit?
2. Whether the impugned order of the Tribunal is justified in view of the judgment of Karnataka High Court in the case of Union of India v. Slovak India Trading Co. (P.) Ltd 2006 (201) ELT 559 (Kar.)?

Analysis:
1. The appeal was filed against an order by the Customs Excise and Service Tax Appellate Tribunal, New Delhi, which held that the appellant cannot be given a cash refund from the Cenvat credit account upon closure of the manufacturing unit. The appellant argued that the issue revolved around whether cash refund of Cenvat credit is permissible in such circumstances.

2. The High Court examined the matter in light of the Division Bench judgment of the Karnataka High Court in Union of India v. Slovak India Trading Co. (P.) Ltd. The Karnataka High Court had ruled that Rule 5 of the Cenvat Credit Rules, 2002, does not explicitly prohibit cash refunds of Cenvat credit. Furthermore, the Supreme Court had dismissed a Special Leave Petition against the Karnataka High Court's decision, noting that the revenue had not appealed similar orders from other Tribunals in Delhi and Mumbai. Notably, the Tribunals in those cases had allowed cash refunds when an assessee exited the Modvat Scheme or closed their unit.

3. Considering the precedents and the revenue's concession that no appeals were filed against the Tribunal orders, the High Court ruled in favor of the appellant on both questions of law. The judgment highlighted the consistent stance of various Tribunals and the Supreme Court's affirmation of the Karnataka High Court's decision, ultimately supporting the entitlement of the assessee to cash refunds in specific scenarios related to closure or exiting the Modvat Scheme.