2023 (8) TMI 243 - AT - Central Excise

Refund of accumulated CENVAT credit - Closure of factory - HELD THAT - The Honourable High Court of Bombay in the case of Gauri Plasticulture Pvt. Ltd. 2019 (6) TMI 820 - BOMBAY HIGH COURT had occasion to consider the very same issue. The decision of the Honourable High Court of Karnataka in the case of Union of India Vs Slovak India Trading Co. Pvt. Ltd. (Karnataka) 2006 (7) TMI 9 - KARNATAKA HIGH COURT was referred to by the Honourable High Court. It was observed that the Division Bench of the Honourable High Court of Karnataka in the said case took a view that there is no express prohibition in Rule 5 to refund the unutilised CENVAT credit. The revenue filed an appeal against such decision before the Honourable Apex court, and on the basis of the representation made by ASG who appeared on behalf of the Union of India that in similar decisions passed by the Tribunal, the revenue had not filed any appeal, the Honourable Apex Court had dismissed the appeal filed by the revenue. Thus there was no declaration of law under Article 141 of the Constitution of India in the said case. After adverting to various decisions on the point the Hon ble High Court of Bombay held that the refund cannot be granted. The facts being identical following the above decision, it is opined that the refund can not be allowed - appeal dismissed.

Summary

Issues involved:
The issue is whether the appellant is eligible for refund of unutilised credit lying in their CENVAT account at the time of closing the factory.

Detailed Judgment:

Issue 1: Eligibility for refund of unutilised credit

The appellant, a manufacturing factory, ceased operations and sold assets to another company. Subsequently, the appellant filed a refund claim for the unutilised credit in their CENVAT account. The department issued a show cause notice proposing to deny the refund claim, which was rejected by the Original authority and upheld by the Commissioner appeals. The appellant argued that they are eligible for a refund based on previous decisions. The High Court of Bombay in the case of Gauri Plasticulture Pvt. Ltd. considered a similar issue and held that the refund cannot be granted. The High Court of Karnataka in the case of Union of India Vs Slovak India Trading Co. Pvt. Ltd. observed that there is no express prohibition in Rule 5 to refund unutilised CENVAT credit. The Tribunal consistently allowed such claims when the unit is closed, and the assessee is out of the Modvat Scheme. The High Court of Karnataka held that even if there is no manufacture due to factory closure, the assessee is eligible for cash refund. The Supreme Court dismissed the appeal by the Revenue, keeping the question of law open. Based on the above, the Tribunal concluded that the refund cannot be allowed, and the appeal by the appellant was dismissed.

Conclusion:

The Tribunal, following the precedent set by the High Court and Supreme Court decisions, ruled that the appellant is not eligible for a refund of unutilised credit in their CENVAT account upon closing the factory. The appeal was dismissed accordingly.