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2023 (5) TMI 136 - AT - Central ExciseRefund of unutilized Cenvat credit - rejection on the ground that Rule 5 of Cenvat Credit Rules is not available for the purpose of refund that too after the closure of the factory - rejection also on the ground that post introduction of CGST Act the appellant has failed to transfer the closing balance of Cenvat credit through Trans-1 as was mandatory in terms of Section 140 of CGST Act 2017. HELD THAT - The perusal of provision of Rule 5, shows that the clause where for any reason such adjustment has not been possible of erstwhile Rule 5 stands deleted. This means that after the amendment, the Cenvat credit if could not be utilized for being considered towards payment of duty/service tax for any reason the refund thereof is no more possible. It is also observed that Rule 5 of the Cenvat credit permits cash refund of accumulated Cenvat credit only in the following circumstances - (1) The Cenvat credit which has accumulated and whose cash refund is sought is in respect of input/input service used in the manufacture of finished goods which have been exported out of India under bond or letter of undertaking or used in intermediate products cleared for export. (2) The assessee is not in a position to utilize the Cenvat credit for payment of duty on finished goods cleared for home consumption or cleared for export under rebate claim. (3) The exports have not been made by claiming draw-back or input duty rebate. Though the appellant had relied upon the decision of Karnataka High Court in UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. 2006 (7) TMI 9 - KARNATAKA HIGH COURT which was also confirmed by the Hon ble Supreme Court but the said case declared that refund claims of Cenvat cannot be subjected to limitation of time irrespective. The period involved is prior or post amendment. In the present case, since the refund claim was filed under Rule 5 of Cenvat Credit Rules, 2004 and after it got amended after April 2012. The amended Rule 5 does not permit refund of such Cenvat credit which could not be utilized for any possible reason. Other than Rule 5 of Cenvat Credit Rules, there is no other provision either in Cenvat Credit Rules, 2004 or in Central Excise Rules, 2002 for giving cash refund of the accumulated Cenvat credit. Even Section 11B of Central Excise Act is only for the refund of duty paid either through cash or through Cenvat credit or for the Cenvat credit wrongly reversed. Hence, this section cannot be invoked in cash refund of the unutilized Cenvat credit lying in the Cenvat account of the manufacturer at the time of closure of the factory. This Tribunal in MODIPON LTD. (FORMERLY KNOWN AS MODIPON FIBRES CO.) VERSUS CCE, GHAZIABAD 2015 (2) TMI 301 - CESTAT NEW DELHI has held that when a factory closes down the Cenvat credit lying unutilized in its Cenvat credit account shall lapse unless the factory resumes production - In the present case, it becomes clear that none of the condition as enumerated above for invoking Rule 5 gets satisfied. In addition, when admittedly, the appellant while registering into new GST regime has not filed Tran-1 showing the impugned unutilized Cenvat credit Section 140 of CGST Act resultantly cannot be invoked. The question of giving cash refund for unutilized lying Cenvat credit does not at all arises. The Adjudicating Authority has not committed any error while holding that Rule 5 of Cenvat Credit Rules, 2004 cannot be invoked to sanction the refund of unutilized Cenvat credit lying with the appellant much prior to April, 2017 that too in cash as per Section 140 of CGST Act, 2017 - Appeal dismissed.
Issues:
The issues involved in the judgment are the rejection of a refund claim of accumulated Cenvat credit by the Department, the applicability of Rule 5 of Cenvat Credit Rules for refund after the closure of the factory, the failure to transfer the Cenvat credit under the GST regime, and the time limitation for filing the refund claim. Issue 1: Rejection of Refund Claim: The appellant filed a refund claim for unutilized Cenvat credit amounting to Rs. 42,17,938 under Rule 5 of Cenvat Credit Rules, 2004. The Department served a show cause notice proposing the rejection of the refund claim, which was confirmed by the Commissioner. The appellant contested this rejection before the Tribunal. Issue 2: Applicability of Rule 5 of Cenvat Credit Rules: The appellant argued that the refund was wrongly rejected based on the failure to transfer the Cenvat credit under the GST regime. They cited relevant tribunal decisions and contended that the time limit under Section 11B of the Central Excise Act does not apply to the refund of accumulated Cenvat credit under Rule 5 of Cenvat Credit Rules. Issue 3: Failure to Transfer Cenvat Credit under GST Regime: The Department argued that the appellant did not surrender its service tax registration upon closing the manufacturing unit and failed to file Trans-1 under GST, resulting in the unutilized Cenvat credit not being transferred to the GST regime. They maintained that the refund claim was rightly considered out of scope due to non-compliance with the time limit. Judgment Summary: The Tribunal observed that the appellant's manufacturing unit closed in the financial year 2016-2017, leading to the accumulation of Cenvat credit due to duty structure differences. Despite transitioning to the GST regime, the appellant did not file Trans-1, hindering the transfer of unutilized Cenvat credit. The Tribunal analyzed the amended Rule 5 of Cenvat Credit Rules, noting that cash refund is only permitted under specific circumstances, which were not met in this case. The Tribunal referenced precedent cases and highlighted that the amended Rule 5 does not allow refunds for unutilized Cenvat credit post-April 2012. It emphasized that no other provision permits cash refunds for accumulated Cenvat credit besides Rule 5. Additionally, it noted that Section 11B of the Central Excise Act does not apply to cash refunds of unutilized Cenvat credit. The Tribunal distinguished the present case from previous decisions, emphasizing the failure to file Trans-1 intentionally and the delay in filing the refund claim beyond the closure of the manufacturing activity. It concluded that the Adjudicating Authority correctly held that Rule 5 cannot be invoked for cash refunds of unutilized Cenvat credit pre-April 2017 under the CGST Act. In conclusion, the Tribunal dismissed the appeal, affirming the rejection of the refund claim for accumulated Cenvat credit, citing non-compliance with Rule 5 and the time limit for filing the claim.
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