2009 (7) TMI 1134 - AT - Central Excise

Refund in cash - unutilised CENVAT credit - closure of factory - Held that - The Tribunal in the case of DCM Fabrics 2008 (11) TMI 525 - CESTAT, NEW DELHI following the decision of the Hon ble Karnataka High Court in the case of UOI v. Slovak India Trading Co. Pvt. Ltd., 2006 (7) TMI 9 - KARNATAKA HIGH COURT held that the assessee s factory is closed and surrendered their central excise registration and the CENVAT credit would be refunded in cash - refund allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
Claim for refund of unutilized credit in cash.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner (Appeals) granting the respondents a refund of unutilized credit in cash amounting to Rs. 4,98,588. The respondents had initially filed a refund claim for a pre-deposit amount of Rs. 6,58,588. The original authority sanctioned the refund, allowing Rs. 4,98,588 to be credited to the Cenvat account. However, the respondents requested a cash refund as their factory had closed, and they had surrendered their central excise registration. The original authority rejected this request, leading to an appeal before the Commissioner (Appeals) where the refund was granted, prompting the Revenue's appeal.

The Jt. CDR argued that as per Rule 5 of Cenvat Credit Rules, refund of Cenvat credit in cash is not permissible. He contended that since the respondents had debited the amount from their Cenvat account, they were not entitled to a cash refund. Referring to legal precedents, the Jt. CDR cited the decision of the Hon'ble Punjab and Haryana High Court in Nahar Industrial Enterprises Ltd. v. UOI and a ruling by the Larger Bench of the Tribunal in Gauri Plasticulture (P) Ltd. v. CCE, Indore, to support his argument.

The respondents, in their written submissions, referred to cases such as DCM Fabrics v. CCE, Jaipur and CCE, Jaipur v. Talforge Pvt. Ltd. to bolster their claim. After considering the arguments and reviewing the records, the Judge noted that the Commissioner (Appeals) had allowed the refund in cash due to the closure of the respondents' factory, rendering them unable to utilize the credited amount in their Cenvat account. The judgment in DCM Fabrics and the decision of the Hon'ble Karnataka High Court in UOI v. Slovak India Trading Co. Pvt. Ltd. were cited to support this reasoning. The Judge distinguished the case from the Punjab and Haryana High Court decision mentioned by the Jt. CDR, emphasizing the unique circumstances of the present case.

Consequently, the Judge found no grounds to overturn the Commissioner (Appeals) decision and dismissed the Revenue's appeal, affirming the refund of unutilized credit in cash to the respondents due to the closure of their factory and the impracticality of utilizing the credit in their Cenvat account.