2024 (10) TMI 1254 - AT - Central Excise

Refund of un-utilised cenvat credit on closure of units - denial of refund in the absence of express statutory mandate or provisions of law - time limitation - HELD THAT - The principle of law was settled by the Tribunal, which was affirmed by the High Court of Karnataka and the Apex Court in Slovak India Trading Co. Pvt. Ltd. 2006 (7) TMI 9 - KARNATAKA HIGH COURT that since there is no manufacture in the light of closure of the company, Rule 5 is not available for the purpose of rejection as has been rightly ruled by the Tribunal and, therefore, the refund has been rightly ordered in the light of the closure of the factory and the assessee having come out of the Modvat Scheme. The appellant is, therefore, entitled to the refund as claimed by him. In the impugned order, the Commissioner (Appeals) has also observed that the claim for refund filed by the appellant on 5.6.2018 is time barred under Section 11B of the Act, which provides that an application for refund of such duty shall be made before the expiry of one year from the relevant date. The Explanation annexed to Section 11B defines the relevant date for the purpose of reckoning the time period within which the refund claim is to be filed. Considering the facts of the present case, it is found that on closure of the unit at Delhi in March, 2016, the appellant vide its letter dated 30.05.2016 had requested the Department to transfer the accumulated cenvat credit to its unit at Gurgaon and thereafter, all the correspondences between the appellant and the Department had been at the Gurgaon address of the appellant. While the said request for transferring the credit amount was pending with the Department, the Central Excise Act, 1994 was repealed w.e.f. July, 2017 and as a result, the amount of cenvat credit accumulated could not be transferred to GST. In the circumstances, the appellant had no other alternative but to seek the refund of the cenvat credit amount of Rs.17,24,470/- and accordingly, the refund application was filed on 5.6.2018 - In the facts of the present case, the refund application cannot be rejected as being time barred. The impugned order deserves to be set aside and hence, the appeal is allowed.

Summary

Issues:
- Refund of un-utilized cenvat credit on closure of unit
- Applicability of statutory provisions for refund
- Time limitation for filing refund application

Analysis:

Issue 1: Refund of un-utilized cenvat credit on closure of unit
The case involved a challenge to the rejection of a refund application by the Commissioner (Appeals) concerning the transfer of accumulated cenvat credit on closure of a manufacturing unit. The Appellate Tribunal revisited the issue in light of various decisions, including the decision in Gauri Plasticulture P. Ltd. vs. Commissioner. The Tribunal concluded that the appellant was entitled to the refund of un-utilized cenvat credit as there was no manufacture due to the closure of the company, rendering Rule 5 inapplicable. The Tribunal relied on the principle established in the case of Slovak India Trading Co. Pvt. Ltd., where it was held that closure of a factory results in no manufacture, entitling the appellant to the refund.

Issue 2: Applicability of statutory provisions for refund
The Tribunal considered the binding effect of the decision in Slovak India Trading Co. Pvt. Ltd. affirmed by the Apex Court, holding that the rejection of the appeal by the Commissioner (Appeals) could not be sustained. The Tribunal emphasized that the decision of the Karnataka High Court in Slovak Trading Co. Pvt. Ltd. had a binding effect under Article 141 of the Constitution of India. The Tribunal clarified that the appellant was entitled to the refund as per the settled principle of law established in previous judgments.

Issue 3: Time limitation for filing refund application
Regarding the time limitation for filing the refund application, the Commissioner (Appeals) contended that the claim was time-barred under Section 11B of the Act. However, the Tribunal disagreed, citing the observations made by the Larger Bench in ATV Projects India Ltd. The Tribunal noted that closure of a factory is a rare occurrence, and the relevant date for filing a refund application in such circumstances cannot be determined solely based on the Explanation Clause in Section 11B. The Tribunal found that the appellant's request for transferring the credit amount was pending with the Department, and due to the repeal of the Central Excise Act, the appellant had to seek a refund in 2018, which was not time-barred.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential benefits to the appellant.