2008 (11) TMI 180 - AT - Central Excise

Cash refund of unutilized balance of cenvat credit finished goods involving Central Excise duty of Rs. 1, 29, 650/- was burnt in fire on 18-3-2003 - goods lost in fire also included 3047 kgs. of goods in process involving duty of Rs. 23, 127/- - remission of this amount of duty involved on finished goods destroyed in fire had been allowed. - Claim for refund of Rs.1, 46, 984/- was filed by the respondents on 2-2-2006 which was disposed of by the Assistant Commissioner Ludhiana by way of sanction in the form of cenvat credit. The Commissioner (Appeals) accepted the plea of the assessees that they were entitled to refund in cash; hence this appeal by the Revenue tribunal upheld the order of grant of refund.

Issues:
1. Remission of Central Excise duty on goods destroyed in fire.
2. Claim for refund in cash.
3. Application of Slovak India Trading Co. Pvt. Ltd. case law.

Analysis:
1. The case involved a dispute regarding the remission of Central Excise duty on goods destroyed in a fire incident. The respondents had reported the destruction of finished goods and goods in process due to fire in their ER-1 return but failed to produce an order for remission of duty from the competent authority. A show cause notice was issued proposing recovery of the duty amounts, which was confirmed by the Order-in-Original. The Commissioner (Appeals) set aside part of the demand, and the respondents filed a claim for refund, which was initially granted as cenvat credit. However, the respondents contended that they were entitled to a cash refund. The Tribunal considered the case of Slovak India Trading Co. Pvt. Ltd. where it was held that refund claims can be made in cash when a company is closed or goes out of the modvat scheme. As the respondents had closed their factory and surrendered their excise license, the Tribunal applied the precedent and upheld the decision to allow the refund, rejecting the appeal by the Revenue.

2. The issue of the claim for a cash refund was crucial in this case. The Tribunal relied on the precedent set by the Slovak India Trading Co. Pvt. Ltd. case, which established that when a company closes its factory and surrenders its excise license, refund claims can be made in cash. The Tribunal noted that Rule 5 of the Cenvat Credit Rules, 2002 does not expressly prohibit the refund of unutilized credit in cases where there was no manufacturing activity due to the closure of the factory. Therefore, based on this interpretation and the specific circumstances of the case where the respondents had closed their factory, the Tribunal upheld the decision to allow the refund in cash, in line with the established legal principles.

3. The application of the Slovak India Trading Co. Pvt. Ltd. case law was central to the Tribunal's decision in this case. The Tribunal referenced the ruling in the mentioned case, where it was held that refund claims can be made in cash when a company goes out of the modvat scheme or closes its operations. This interpretation was further supported by a decision of the Hon'ble High Court of Karnataka, which upheld the Tribunal's ruling. In the present case, the respondents had closed their factory and surrendered their excise license, aligning with the circumstances outlined in the Slovak India Trading Co. Pvt. Ltd. case. Consequently, the Tribunal applied the principles established in the referenced case law to uphold the decision to grant the cash refund to the respondents, rejecting the appeal by the Revenue.

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