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2025 (3) TMI 1134 - AT - Central ExciseRefund of unutilized CENVAT credit - closure of factory - rejection of refund on the ground that there was no export clearance made by the appellant - HELD THAT - Since the appellant does not export the goods refund of CENVAT credit shall be allowed as he does not fullfill the conditions above. Further due to the absence of exports the ratio of export turnover to the total turnover cannot be determined. The Honorable Supreme Court UNION OF INDIA ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. 2021 (9) TMI 626 - SUPREME COURT held that refund is not a constitutional right but a statutory right and therefore the legislature in its wisdom and through statute can decide how the refund is to be granted. The judgment of the Hon ble Bombay High court in GAURI PLASTICULTURE 2019 (6) TMI 820 - BOMBAY HIGH COURT discusses the legal issues and the judgments cited by the appellant comprehensively. It thus merits to be followed. Thus it is concluded that rule 5 of CCR read with N/N. 05/2006-CE(N.T.) as it then stood i.e. prior to 01.04.2011 does not permit the refund of credit which is not on account of the export of goods. Section 11B(2)(c) of CEA is to be read with the rules or notification issued under the Act and would hence necessarily involve Rule 5 of CCR and N/N. 05/2006-CE(N.T.). The refund claim of the appellant has thus been correctly rejected in the impugned order. Conclusion - The legal framework as interpreted by the relevant precedents did not support the appellant s claim for a refund of unutilized CENVAT credit in the absence of export activities. Appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment was whether Rule 5 of the CENVAT Credit Rules, 2004, read with Notification No 05/2006-CE(N.T.), as it stood before 01.04.2011, permits the refund of unutilized CENVAT credit when there is no export clearance. Additionally, the issue was whether Section 11B of the Central Excise Act, 1944, independently allows for such a refund, bypassing the conditions set out in Rule 5. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents: The legal framework primarily involves Rule 5 of the CENVAT Credit Rules, 2004, and Section 11B of the Central Excise Act, 1944. Rule 5 allows for the refund of unutilized CENVAT credit under specific conditions, primarily related to the export of goods. The relevant notification, No 05/2006-CE(N.T.), outlines the procedure for claiming such refunds, emphasizing the necessity of export clearance. Precedents cited include decisions from various tribunals and high courts, such as Slovak India Trading Co. Pvt. Ltd. and Gauri Plasticulture P. Ltd., which discuss the conditions under which refunds of unutilized CENVAT credit may be granted. Court's Interpretation and Reasoning: The Tribunal interpreted Rule 5 as allowing refunds only in cases where there is an export of goods or services. It emphasized that the rule, as it stood before April 2011, did not permit refunds for unutilized credit in the absence of export activities. The Tribunal referred to the judgment in Gauri Plasticulture, which clarified that the legislative intent was to restrict refunds to scenarios involving exports. Key Evidence and Findings: The appellant did not dispute the lack of export clearance. The evidence presented focused on the interpretation of Rule 5 and whether Section 11B could independently justify the refund. The Tribunal found that the appellant's reliance on Section 11B was misplaced, as it must be read in conjunction with the rules and notifications under the Act. Application of Law to Facts: The Tribunal applied Rule 5 and the relevant notification to the facts, concluding that the appellant's lack of export activities disqualified them from receiving a refund of unutilized CENVAT credit. The Tribunal noted that the absence of export turnover made it impossible to apply the required ratio of export turnover to total turnover. Treatment of Competing Arguments: The appellant's arguments, supported by various judgments, were considered but ultimately rejected. The Tribunal found that the cited cases did not support the appellant's position under the specific circumstances of this case. The Tribunal emphasized the binding nature of the precedent set by the Bombay High Court in Gauri Plasticulture, which was more directly applicable. Conclusions: The Tribunal concluded that the appellant was not entitled to a refund of unutilized CENVAT credit under Rule 5, as it stood before April 2011, due to the absence of export activities. It also concluded that Section 11B could not be invoked independently to justify the refund. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Tribunal quoted the Bombay High Court's judgment in Gauri Plasticulture, emphasizing that "refund of CENVAT credit is permissible only when there is a clearance of a final product of a manufacturer or of an intermediate product for export without payment of duty under a bond or letter of undertaking." Core principles established: The judgment reinforced the principle that refunds of unutilized CENVAT credit are contingent upon meeting specific conditions, primarily related to export activities. It clarified that Section 11B must be read in conjunction with the rules and notifications under the Central Excise Act. Final determinations on each issue: The Tribunal determined that the appellant's appeal lacked merit and upheld the decision to reject the refund claim. It concluded that the legal framework, as interpreted by the relevant precedents, did not support the appellant's claim for a refund of unutilized CENVAT credit in the absence of export activities.
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