2018 (6) TMI 113 - AT - Central Excise

Refund in cash of amount debited in CENVAT credit account - closure of unit - whether refund can be granted in cash when the assessee unit is closed or otherwise? - Held that - The issue is no more res integra as the Hon ble High Court of Rajasthan in the case of Luv Kush Textiles v. Commissioner of Central Excise, Jaipur II 2017 (5) TMI 1021 - RAJASTHAN HIGH COURT was considering an identical issue and held that there are no express provisions of Rule 5 in debarring refund of such amount in cash - refund allowed in cash - appeal dismissed - decided against Revenue.

Summary

Issues:
Refund of CENVAT credit in cash when factory is closed.

Analysis:
The appeals were filed by Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs. Despite the absence of the respondent, the appeals were taken up for disposal due to the narrow issue involved. The respondent had debited amounts in the CENVAT credit account following a favorable judgment in their proceedings. The respondent sought a refund of these amounts, which was initially sanctioned by way of CENVAT credit in their account. However, the respondent contested this decision, seeking cash refund as their factory was closed. The first appellate authority directed the lower authority to refund the amounts in cash, leading to Revenue's grievance and subsequent appeal.

The main contention raised by Revenue was the absence of provisions in the CENVAT Credit Rules, specifically Rule 5, for refunding CENVAT credit in cash, especially in cases of factory closure. Revenue argued that the reliance placed on certain judgments by the first appellate authority was incorrect. The Learned Authorised Representative relied on judgments by the Larger Bench of the Tribunal to support the argument that there is no provision for cash refund of CENVAT credit to the assessee, making the impugned order incorrect.

Upon considering the submissions and records, the Member (Judicial) found the issue to be whether refund can be granted in cash when an amount is debited in the CENVAT credit account during proceedings before lower authorities, particularly when the assessee unit is closed. The Member referred to a judgment by the Hon'ble High Court of Rajasthan in a similar case, where it was held that there are no express provisions debarring cash refund under Rule 5. The Member noted the facts of the Rajasthan case and the applicable ratio, emphasizing that Rule 5 does not prohibit cash payment of refund amounts, especially when the manufacturing unit is closed. As a result, the Member concluded that the impugned orders were correct and legal, warranting no interference, and thus rejected the appeal.

In conclusion, the judgment clarified the issue of refunding CENVAT credit in cash when a factory is closed, based on relevant legal provisions and precedents, ultimately upholding the decision of the first appellate authority and dismissing Revenue's appeal.