2017 (5) TMI 1021 - HC - Central Excise

Refund of cenvat credit - Duty under protest - closer of factory - Held that - Taking into consideration, the Rule 5 of the CENVAT Credit Rules 2002, we are of the view that the Tribunal was not correct while relying upon the judgment of the Larger Bench in Gauri Plasticculture (P) Ltd. 2006 (8) TMI 225 - CESTAT, MUMBAI as Rule 5 in no way prohibits the payment of the refund amount in cash and more particularly when after a proper adjudication of matter an amount of ₹ 63,001/- is said to have been sanctioned in favour of assessee (appellant) and the factum of their manufacturing unit having been closed, we are of the considered opinion that the present appeal deserves acceptance, the same is, therefore, allowed - Decided in favor of the assessee.

Summary

Issues:
1. Entitlement to cash refund under CENVAT Credit Rules, 2002 upon closure of factory.

Analysis:
The appellant, a manufacturer of ACSR Conductors of Aluminum, faced a demand raised against them, leading to a refund application for CENVAT credit of ?63,001 after surrendering their registration certificate due to the closure of their manufacturing unit. The Revenue appealed against the refund sanction, leading to a series of rejections by authorities. The Tribunal, relying on a Larger Bench decision, held that cash refund was not warranted. The substantial question of law framed by the Court focused on the justification of cash refund under Rule 5 of the CENVAT Credit Rules, 2002.

The appellant argued that Rule 5 does not prohibit cash refund upon factory closure, citing precedents like Commissioner of Central Excise, Ranchi Vs. Ashok ARC and The Union of India Vs. Slovak India Trading Company Private Limited. The Revenue contended that there is no provision for cash refund under the Rules. The Court noted that Rule 5 allows a refund of the amount subject to specified conditions, without expressly prohibiting cash refunds, especially when the manufacturing unit is closed and the claim is crystallized.

Referring to the judgments from Jharkhand and Karnataka High Courts, the Court emphasized that the absence of manufacturing activity due to factory closure does not disqualify the appellant from cash refund entitlement. The Court disagreed with the Tribunal's reliance on the Larger Bench decision, asserting that Rule 5 does not restrict the form of refund. Consequently, the Court allowed the appeal, directing the Revenue to pay the refund amount of ?63,001 in cash within two months.

In conclusion, the Court held in favor of the appellant, emphasizing the entitlement to cash refund under Rule 5 of the CENVAT Credit Rules, 2002 upon the closure of the manufacturing unit, rejecting the Revenue's argument against cash refunds and directing the Revenue to make the payment within the specified timeframe.