2016 (8) TMI 293 - AT - Central Excise

Refund of unutilized Cenvat credit - closure of factory - due to suffering heavy losses, the appellants stopped their production - surrender of registration certificate - Held that - in view of the decision of Hon ble High Court of Karnataka in the case of Union of India V. Slovak Trading Co. Pvt. Ltd. 2006 (7) TMI 9 - KARNATAKA HIGH COURT which was affirmed by Supreme Court in 2007 (1) TMI 556 - SUPREME COURT , there is no express prohibition in terms of Rule 5. Also the Tribunal is fully justified in ordering refund partly in the light of the closure of the factory and in the light of the assessee coming out of modvat scheme. Therefore, the refund cannot be denied. - Decided in favour of appellant with consequential relief

Summary

Issues:
- Refund of unutilized CENVAT credit upon surrendering registration certificate.

Analysis:
1. Background: The appellant, a private limited company engaged in manufacturing ACSR conductors, stopped production in October 2006 due to losses, cleared closing stocks in April 2007, and surrendered their Central Excise registration certificate with unutilized balance in their accounts.

2. Appellant's Argument: The appellant sought a refund of the unutilized balance, which was denied by the Department citing no provision for refund of lapsed credit. The Commissioner upheld this decision, stating the CENVAT credit scheme does not allow cash refund except for specific situations like exports.

3. Appellant's Legal References: The appellant cited various judgments, including Union of India v. Slovak Trading Co. Pvt. Ltd., to support their claim for refund based on closure of business and unutilized credit. The High Court's ruling in the Slovak Trading case allowed refund in similar circumstances.

4. Department's Argument: The Department argued that unutilized CENVAT credit lapses upon closure of business, relying on precedents like Purvi Fabrics & Texturise (P) Ltd. v. CCE.

5. Judgment: The Tribunal analyzed Rule 5 of the CENVAT Credit Rules 2004, noting no express prohibition on refund in case of closure. Citing the Slovak Trading case, the Tribunal held in favor of the appellant, allowing the refund of unutilized CENVAT credit upon surrendering the registration certificate. The Department's arguments were dismissed based on the High Court's ruling and subsequent affirmations by the Supreme Court and other tribunals.

6. Conclusion: The impugned order denying the refund was set aside, and the appeal of the appellant was allowed with consequential relief. The judgment emphasized the applicability of Rule 5 and legal precedents supporting the refund of unutilized credit in cases of business closure, in alignment with the Slovak Trading case and subsequent judicial interpretations.