2017 (6) TMI 931 - AT - Central Excise

Refund of unutilised CENVAT credit - closure of factory - Held that - the appellant's case is squarely covered by the decision of the Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. 2006 (7) TMI 9 - KARNATAKA HIGH COURT , where it was held that there was no prohibition under Rule 5 of CCR, 2004 to refund the unutilised credit when the factory is closed - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Refund of unutilized CENVAT credit on closure of factory under Rule 5 of CENVAT Credit Rules, 2004.

Detailed Analysis:

Issue 1: Refund Claim Rejection
The appellant, a manufacturer of plastic articles, applied for a refund of unutilized CENVAT credit upon closing their unit. The claim was rejected based on allegations that the imported goods were sold in the open market without proper endorsement on the DFCE certificate, and no export clearances were affected. The adjudicating authority rejected the claim, leading to the appellant's appeal.

Issue 2: Appellate Authority's Decision
The appellant contended that the impugned order was passed contrary to CCRs, 2004, and binding judicial precedents. They argued that the imported plastic granules were used to manufacture plastic articles sold to the high sea seller, emphasizing the difference between raw materials and final products. The appellant claimed they informed the authorities upon factory closure and were entitled to the refund. They cited the Karnataka High Court's decision in Slovak India Trading Co Pvt. Ltd. to support their case.

Issue 3: Precedents and Legal Interpretation
The appellant relied on various precedents, including CCE Tirupati v. Kores (India) Ltd., CCE Jalandhar v. S.K. Sacks P. Ltd., and CCE Tirupati v. Kores (India) Ltd., to argue for the refund of unutilized credit due to factory closure. The appellant's position was supported by these legal precedents, emphasizing the need to refund unutilized credit in case of factory closure.

Issue 4: Respondent's Argument
The respondent argued that unutilized CENVAT credit would lapse upon the closure of the factory, citing decisions such as Modipon Ltd. v. Ghaziabad and Phoenix Industries Pvt. Ltd. v. CCE, Raigad to support their position.

Final Decision
After considering both sides' submissions and reviewing the records, the Appellate Tribunal found that the appellant's case aligned with the Karnataka High Court's decision in Slovak India Trading Co. Pvt. Ltd. The Tribunal concluded that the impugned order was not sustainable in law and set it aside, allowing the appeal with consequential reliefs, if any.

This detailed analysis covers the issues involved in the legal judgment regarding the refund of unutilized CENVAT credit upon the closure of a factory under Rule 5 of CENVAT Credit Rules, 2004.