2005 (12) TMI 24 - AT - Central Excise

Central Excise Cenvat credit on capital goods Refund of cash Cenvat credit is admissible rare the assessee was prevented for availing Cenvat credit by the department itself

Summary

Issues:
1. Allowance of Modvat credit on capital goods.
2. Entitlement to cash refund due to closure of unit and surrender of Central Excise registration.

Issue 1: The respondents availed Modvat credit on capital goods imported by them, which was disallowed by the original authority but allowed by the first appellate authority and the jurisdictional Deputy Commissioner. However, as the party had closed down their unit and surrendered Central Excise registration, they were unable to take re-credit of the amount. The Commissioner (Appeals) allowed cash refund to the assessee, leading to the Revenue's appeal.

Issue 2: The lower appellate authority relied on a Tribunal decision to hold that the assessee was entitled to cash refund due to the closure of their unit. The appellant sought to distinguish the case by arguing that the assessee in the precedent case was unable to avail Modvat credit for a different reason. The consultant for the respondents cited various Tribunal decisions to support the claim for cash refund based on the closure of the unit and inability to take Modvat credit.

Analysis: The Tribunal considered the precedents where cash refund was allowed when an assessee was unable to avail credit due to specific circumstances, such as being a small-scale unit or closing down the unit. In this case, the respondents closed their unit and surrendered Central Excise registration, making them ineligible to take CENVAT credit. The Tribunal noted that even though the rule did not explicitly cover this scenario, a general principle seemed to apply that entitled an assessee to cash refund when unable to take credit for any reason. Following this principle and the precedents, the Tribunal upheld the Commissioner (Appeals)'s decision to allow cash refund to the respondents, as they were unable to re-credit the amount due to the closure of their unit.

In conclusion, the Tribunal affirmed the decision to allow cash refund to the respondents, as they could not take re-credit of the amount following the closure of their unit. The order of the Commissioner (Appeals) was upheld, and the appeal by the Revenue was dismissed.