2018 (7) TMI 908 - AT - Central Excise

Refund of accumulated CENVAT Credit - closure of production due to fire accident - Rule 5 of the Cenvat Credit Rules, 2004 - section 11B of Central Excise Act, 1944 - Held that - The combined reading of both these provisions makes it clear that the refund of Cenvat Credits on inputs is admissible where such inputs have been used in the final product for export - But the fact of the present case is that the Appellant unit had stopped the manufacturing activity due to a fire accident in their premises and the refund has also been claimed solely on the said basis of the balance lying unutilized in their Cenvat Credit account. Thus, admittedly and apparently, appellant s case is not covered by the above said provisions. In the present case, admittedly, there is no manufacture subject to the closure of the company. Hence, the refund in furtherance of Rule 5 is not available. Since there is no provision under Cenvat Credit Rules, 2004 to permit refund of accumulated Cenvat Credit, where the manufacture activity has been stopped the adjudicating authorities below, have rightly rejected the claim - appeal dismissed - decided against appellant.

Summary

Issues:
Refund of accumulated Cenvat Credit after closure of production due to fire accident.

Analysis:
The appellant, engaged in manufacturing acrylic fibre, sought refund of unutilized Cenvat Credit after a fire accident halted production. The appeal was against the rejection of the refund claim of ?46,28,767. The appellant argued for refund citing the Union of India vs. M/s Slovak India Trading Co. Pvt. Ltd. case, emphasizing refund entitlement if manufacturing operations cease. However, the respondent contended that no provision allows refund of unutilized credit except for export-related accumulation. The dispute centered on Rule 5 of the Cenvat Credit Rules, 2004, which permits refund only when inputs are used in final products for export, not in cases of manufacturing cessation due to unforeseen events like fire accidents.

The Tribunal analyzed Rule 5 and Provision 11B of the Central Excise Act, 1944, concluding that the appellant's case did not qualify for refund under these provisions. The appellant's reliance on the M/s Slovak India Trading Co. Pvt. Ltd. case was deemed irrelevant since Rule 5 specifically pertains to manufacturing activities, absent in the appellant's situation post-fire accident. The Tribunal referenced the cases of M/s Steel Strips vs. CCE, Ludhiana and M/s Super Rubbers, Gurgaon vs. CCE, Gurgaon to support its decision. It highlighted the importance of strict construction of eligibility criteria for refunds and emphasized that the absence of a provision in the Cenvat Credit Rules for refunds post-manufacturing halt justified the rejection of the claim.

The Tribunal's ruling emphasized the lack of a provision in the Cenvat Credit Rules, 2004 for refunding accumulated credit when manufacturing activities cease due to unforeseen events. The decision was based on a strict interpretation of the rules and relevant legal precedents, ultimately upholding the rejection of the appellant's refund claim. The judgment reiterated the importance of adhering to statutory provisions and clarified that the absence of specific provisions precluded refund entitlement in such circumstances.