2022 (3) TMI 186 - AT - Central Excise

Refund of accumulated CENVAT Credit - request for transfer of accumulated balance - denial on the ground that such transfer is not contemplated in CENVAT Credit Rules, 2004 - time limitation - section 11B of Central Excise Act, 1944 - HELD THAT - The issue of monetizing of CENVAT credit in balance with assessee had, in the light conflicting opinions within the Tribunal and decision of the Hon ble High Court of Karnataka, been considered by a Larger Bench of the Hon ble High Court of Bombay in M/S. GAURI PLASTICULTURE P. LTD., BOMBAY DYEING MANUFACTURING CO. LTD., M/S. SIMPLEX MILLS CO. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, INDORE, THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI IV, THE UNION OF INDIA THROUGH THE COMMISSIONER OF CENTRAL EXCISE MUMBAI I 2019 (6) TMI 820 - BOMBAY HIGH COURT where it was held that The transitional provision that any amount of credit earned by a manufacturer under the Cenvat Credit Rules, 2002, as they existed prior to the 10th September, 2004 or by a provider of output service under the Service Tax Credit Rules, 2002 as they existed prior to 10th September, 2004 and remaining un-utilised on that day shall be allowed as Cenvat Credit to such manufacturer or provider of output service under these rules, and be allowed to be utilised in accordance with these rules. This is how the transitional provision enables carrying forward of the un-utilised Cenvat Credit. That is a distinct contingency altogether. That transitional provision does not enable us to hold that the amount of un-utilised Cenvat Credit can be refunded in cash. There is no merit in the appeal preferred before the Tribunal and the rejection of the claim for refund of accumulated credit is upheld - Appeal dismissed.

Summary

Issues:
Transfer of accumulated CENVAT credit balance for manufacturer of motor vehicle parts shifting operations, denial of refund claim under section 11B of Central Excise Act, 1944, interpretation of CENVAT Credit Rules, 2004, consideration of precedents in Voltas Ltd and Idol Textile Ltd cases, monetization of CENVAT credit balance, conflicting opinions within the Tribunal, decision of the Hon'ble High Court of Bombay in Gauri Plasticulture P Ltd case.

Analysis:
The appellant, a manufacturer of motor vehicle parts, sought to transfer capital goods and raw materials to another facility in Haryana, leading to a dispute regarding the transfer of accumulated CENVAT credit balance of ?16,77,371 as on 31st June 2017. The denial of the refund claim under section 11B of the Central Excise Act, 1944 was based on the contention that such transfer is not envisaged in the CENVAT Credit Rules, 2004. Despite the rejection, the Commissioner of Central Tax directed compliance with rule 10 of the said Rules. The appellant approached the Tribunal seeking a refund of the entire accumulated CENVAT credit balance.

The Learned Authorized Representative referenced previous Tribunal decisions in Voltas Ltd and Idol Textile Ltd cases, emphasizing the need to scrutinize each refund claim's circumstances rather than relying solely on statutory exclusions. The Representative highlighted the purpose of CENVAT credit as a mechanism to prevent tax cascading effects, allowing duty liability discharge from cash deposits or existing tax credits. The legislative intent behind CENVAT credit rules was clarified, indicating that the scheme aims to ensure the ultimate burden of duty or tax falls on the end consumer in the production chain.

The issue of monetizing the CENVAT credit balance with the assessee was further discussed, noting conflicting opinions within the Tribunal and the Gauri Plasticulture P Ltd case decision by the Hon'ble High Court of Bombay. The questions raised regarding cash refunds under section 11B(2) of the Central Excise Act, 1944, and the closure of manufacturing activities were answered against the assessee, upholding the Revenue's position. Consequently, the appeal before the Tribunal was deemed meritless, and the rejection of the refund claim for the accumulated credit was upheld, leading to the implementation of the impugned order.

In conclusion, the Tribunal dismissed the appeal, affirming the rejection of the claim for refund of the accumulated CENVAT credit balance. The decision was based on the interpretation of relevant legal provisions, precedents, and the legislative intent behind the CENVAT credit scheme, ultimately upholding the Revenue's stance on the matter.