2018 (6) TMI 637 - AT - Central Excise

Refund of unutilized CENVAT credit - closure of factory / cancellation of registration - Held that - Rule 10 provides for transfer of CENVAT credit in case of transfer of ownership or shift of factory etc. - In the present case, as per the business scheme change agreement entered into between the parties, there is no terms and conditions in respect of transfer of CENVAT credit to M/s. RNAIPL. The appellant has submitted that the liabilities are retained by the appellant. They have surrendered the registration and undisputedly they have become non-functional with effect from 10.4.2012. Thus they have ceased to be manufacturer of cars with effect from 10.4.2012 due to closure of unit / surrender of Central Excise registration - A similar situation was analyzed 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 - KARNATAKA HIGH COURT , where the refund claim was allowed. The appellant is eligible for refund of the balance CENVAT credit when the appellant ceases to be a manufacturer due to closure of factory - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund of unutilized CENVAT credit due to closure of factory.

Analysis:
The appellant, engaged in manufacturing motor cars, decided to sell assets to M/s. Renault Nissan Automotive India Pvt. Ltd. and surrendered registration, becoming non-functional. A refund claim was filed for unutilized CENVAT credit balance, which was rejected by the original authority and upheld by the Commissioner (Appeals), leading to the current appeal.

The consultant argued that the CENVAT credit was not transferred to M/s. RNAIPL as per the business change agreement, and cited relevant case law supporting refund of unutilized credit in similar situations. The AR contended that the appellant should have transferred the credit to the new owner as per Rule 10 of CENVAT Credit Rules, 2004, and there is no provision for refund in case of factory closure.

The Tribunal noted that the business agreement did not include terms for transferring CENVAT credit, and the appellant ceased to be a manufacturer post closure. Citing the Karnataka High Court and Supreme Court judgments, the Tribunal held that Rule 5 does not prohibit refund in such cases. Referring to various High Court decisions and Tribunal orders, the Tribunal allowed the appeal, stating that the rejection of the refund claim was unjustified.

In conclusion, the Tribunal allowed the appeal, setting aside the rejection of the refund claim and granting consequential relief, if any, based on the established legal principles and precedents cited in the judgment.