2019 (2) TMI 78 - AT - Central Excise

Refund of accumulated / unutilized CENVAT credit - closure of manufacturing activity - applicability of Rule 5 of CENVAT Credit Rules, 2004 - whether relevant Rule 5 of CENVAT Credit Rules deals with situation of export and not of closure of factory? - Held that - The Hon ble High Court of Karnataka in the case of Slovak Trading Co. Pvt. Ltd. 2007 (1) TMI 556 - SUPREME COURT had occasion to analyze the very same issue and held that even though there is no provision for grant of refund on account of closure of factory, since the appellant has gone out of the CENVAT credit scheme, they are eligible for refund - denial of refund is not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund of unutilized CENVAT credit due to closure of factory.

Analysis:
The case involved the appellants, engaged in manufacturing printed flexible packaging material, who filed a refund claim of &8377; 6,85,366/- for unutilized CENVAT credit after closing down their manufacturing activity and surrendering their registration certification. The original authority and Commissioner (Appeals) rejected the refund claim citing ineligibility under Rule 5 of CENVAT Credit Rules, 2004.

The appellant's counsel argued that the denial of refund was unjustified as there is no provision in the CENVAT Credit Rules specifically addressing refunds due to factory closure. They relied on the decision of the Hon'ble High Court of Karnataka in the case of Union of India Vs. Slovak Trading Co. Pvt. Ltd., where it was held that even though there is no explicit provision for refund upon factory closure, if the appellant exits the CENVAT credit scheme, they are entitled to a refund. This argument was supported by the decision of the Tribunal in the case of Commissioner of Central Excise Vs. Kores India and the subsequent decision of the Hon'ble High Court of Rajasthan in the case of Welcuredruges and Pharmaceuticals Ltd. Vs. Commissioner of Central Excise.

After considering the precedents and arguments, the Tribunal found the denial of refund to be unjustified. Citing the decisions in similar cases, the Tribunal concluded that there is no express prohibition in Rule 5 against refunding CENVAT credit when a factory is closed down. Therefore, the impugned order disallowing the refund was set aside, and the appeal was allowed with any consequential relief deemed necessary.