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2018 (4) TMI 1233 - HC - Central ExciseCash Refund of unutilized CENVAT credit - closure of factory and surrendered registration certificate - Section 11B of CEA - the view taken by the Division Bench of this Court in the case of the COMMISSIONER OF C. EX., NASIK Versus JAIN VANGUARD POLYBUTLENE LTD. 2010 (6) TMI 171 - BOMBAY HIGH COURT , not agreed upon, where it was held that revenue cannot be allowed to take different view when question raised identical to previous case. - It will be more appropriate if the questions are considered by the larger bench - Matter referred to Larger Bench to decide the issue - (a) Whether cash refund is permissible in terms of clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 where an assessee is unable to utilize credit on inputs? - (b) Whether by exercising power under Section 11B of the said Act of 1944, a refund of un utilized amount of Cenvat Credit on account of the closure of manufacturing activities can be granted - (c) Whether what is observed in the order dated 25th January 2007 passed by the Apex Court in Petition for Special Leave to Appeal (Civil) No. CC 476 of 2007 (Union of India vs Slovak India Trading Company Pvt Ltd) can be read as a declaration of law under Article 141 of the Constitution of India? Matter referred to Larger Bench.
Issues Involved:
1. Denial of Small Scale Industries (SSI) exemption. 2. Rejection of refund claims due to lapse of unutilized credit. 3. Permissibility of cash refund of unutilized credit under Section 11B of the Central Excise Act, 1944. Issue-wise Detailed Analysis: 1. Denial of Small Scale Industries (SSI) exemption: The appellant was engaged in the manufacture of resin PVC Pipes and Fittings and was denied SSI exemption under the notification dated 28th February 1993. The Additional Director issued a show cause notice on 16th March 2000 for the recovery of duty amounting to ?8,45,483/- for the period from April 1996 to October 1998, denying the SSI exemption on the grounds that the appellant was manufacturing pipes under the brand name "Jain Pipe." The Order-in-Original confirmed the demand and imposed penalties under Section 11AC of the Central Excise Act, 1944, and Rule 173Q of the Central Excise Rules, 1944. However, the Commissioner (Appeals) allowed the appeal, holding that "Jain Pipe" could not be considered a brand name. 2. Rejection of refund claims due to lapse of unutilized credit: Following the favorable order in appeal, the appellant sought a refund of ?8,41,043/- deposited under Section 35F of the Central Excise Act, 1944. A show cause notice issued on 18th June 2004 proposed rejecting the refund claim on the basis that the unutilized credit lapsed upon surrendering the registration certificate on 8th September 2000. The Deputy Commissioner, in the Order-in-Original dated 21st September 2004, rejected the refund claim and sanctioned only ?2,32,721/-. The Commissioner (Appeals) upheld this order, stating that the appellant was not entitled to a cash refund but could claim credit in the Cenvat Account. 3. Permissibility of cash refund of unutilized credit under Section 11B of the Central Excise Act, 1944: The appellant's appeal to the Appellate Tribunal was referred to a larger bench, which concluded that cash refunds of unutilized credit were not permissible unless the duty was paid in cash through the PLA. The regular bench dismissed the appeal based on the larger bench's findings. The appellant argued that the decision of the Karnataka High Court in Union of India vs. Slovak India Trading Co. Pvt. Ltd. (2006) supported the permissibility of cash refunds even when the manufacturing activity ceased due to the closure of the company. The Karnataka High Court's decision, upheld by the Apex Court, and other consistent tribunal decisions, supported the appellant's claim. However, the revenue contended that the Apex Court's confirmation was based on a concession and not on merits. Judgment Analysis: The High Court considered the submissions and previous judgments, including the Slovak India Trading Co. Pvt. Ltd. case, which allowed refunds in the case of factory closure. The court noted that the Apex Court had dismissed the special leave petition against the Karnataka High Court's decision but left the question of law open. The High Court also referenced the larger bench decision in Steel Strips vs. Commissioner of Central Excise, Ludhiana, which held that refunds of unutilized credit were not permissible except in the case of exports. Given the conflicting views and the need for clarity on the legal questions, the High Court decided to refer the following questions to a larger bench: (a) Whether cash refund is permissible under clause (c) to the proviso to Section 11B(2) of the Central Excise Act, 1944, when an assessee is unable to utilize credit on inputs. (b) Whether a refund of unutilized Cenvat Credit can be granted under Section 11B due to the closure of manufacturing activities. (c) Whether the Apex Court's order in the Slovak India Trading Company case constitutes a declaration of law under Article 141 of the Constitution of India. The High Court directed the Prothonotary and Senior Master to place the appeals before the Hon'ble Acting Chief Justice for appropriate orders on the administrative side.
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