2014 (6) TMI 343 - AT - Central Excise

Refund of accumulated unutilized Cenvat Credit - closure of the factory - surrender of central excise registration - Held that - the refund of the appellant does not fall under any of the rules and that there are no express or implicit provisions in the Central Excise Act and Cenvat Credit Rules for grant of refund of Cenvat Credit balance lying unutilized at the time of closure of the unit. - The findings of the first appellate authority is in variance of law as has been settled by the Hon ble High Court of Karnataka in the case of Union of India Vs. Slovak India Trading Co. Pvt. Ltd. 2006 (7) TMI 9 - HIGH COURT OF KARNATAKA (BANGALORE) wherein it was held that, There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for the purpose of rejection . - This decision was followed by the Hon ble High Court of Bombay in the case of CCE, Nasik Vs. Jain Vanguard Polybutylene Ltd. (2009 (6) TMI 790 - CESTAT, MUMBAI) Judgment of the Hon ble High Court of Karnataka in the case of Union of India Vs. Slovak India Trading Co. Pvt. Ltd. (supra) was cited before the Larger Bench and it was taken note of, but no reasonings have been recorded as to why the said judgment of the Hon ble High Court of Karnataka was not applicable in the similar / identical situations. In my view, the judgments of the Hon ble High Court of Bombay and Karnataka will have to be followed by the Tribunal in an identical / similar situation. In the case in hand, I find that the issue involved is identical to the issue which was before the Hon ble High Court of Bombay and Karnataka. - Decided in favour of assessee.

Summary

Issues Involved:
Refund of accumulated Cenvat Credit upon surrender of central excise registration at the time of closure of the factory.

Detailed Analysis:

Issue 1: Refund Claim Rejection
The appellant closed their manufacturing activities and submitted a refund claim for unutilized Cenvat Credit. The claim was rejected by the adjudicating authority and also under Section 11B of the Central Excise Act, 1944. The first appellate authority upheld the rejection citing unjust enrichment due to duty paid on inputs included in the price of goods. The appellant argued citing settled law in various cases supporting the refund claim.

Issue 2: Interpretation of Law
The Departmental Representative referenced a Larger Bench judgment in the case of Steel Strips Vs. CCE, Ludhiana, which covered the issue of refund of accumulated credit on closure of a unit. The appellant contended that the first appellate authority's decision was contrary to established law as per the High Court of Karnataka's ruling in Union of India Vs. Slovak India Trading Co. Pvt. Ltd. The High Court held that Rule 5 of the Cenvat Credit Rules does not apply when there is no manufacture due to closure of the company, thus justifying the refund.

Issue 3: Judicial Precedence
The Tribunal considered the judgments of the High Courts of Karnataka and Bombay, which supported the appellant's claim for refund in similar circumstances. The Tribunal emphasized the importance of following High Court decisions over Tribunal orders, especially when the issues are identical. The Tribunal set aside the impugned order and allowed the appeal, granting the appellant consequential relief based on established legal principles.

In conclusion, the judgment favored the appellant's refund claim of accumulated Cenvat Credit upon surrendering central excise registration at the time of factory closure, citing relevant legal precedents and interpretations to support the decision.