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2018 (8) TMI 1169 - HC - Central ExciseRefund of accumulated Cenvat Credit - closure of factory - Whether in the facts and circumstances of the present case, Appellate Tribunal was correct, in law, and justified in holding that there is no provision for allowing refund of accumulated Cenvat Credit on closure of the factory? - Rule 5 of the Cenvat Credit Rules, 2004. Held that - The principle of estoppel applies as once the department has accepted the view taken by the Tribunal it will not be appropriate to challenge the same by choosing the present assessee - the judicial discipline is required to be maintained. The Tribunal cannot distinguish the High Court judgments. They are bound by the High Court judgments even jurisdictional High Court and at the most they can refer it back prior to distinguish on facts but no authority has been made. Full Bench decision of the Tribunal has to be followed. Reliance placed in the case of UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. 2006 (7) TMI 9 - KARNATAKA HIGH COURT , where Karnatake High Court has held that Tribunal is fully justified in ordering refund particularly in the light of the closure of the factory and in the light or the assessee coming out of the Modvat Scheme. Appeal allowed - decided in favor of assessee.
Issues Involved:
1. Whether the Appellate Tribunal was correct in holding that the refund cannot be allowed under Rule 5 of the Cenvat Credit Rules, 2004. 2. Whether the Appellate Tribunal was correct in holding that there is no provision for allowing refund of accumulated Cenvat Credit on the closure of the factory. Detailed Analysis: Issue 1: Refund under Rule 5 of the Cenvat Credit Rules, 2004 The appellant challenged the Tribunal's decision that denied the refund under Rule 5 of the Cenvat Credit Rules, 2004. The appellant's factory, which manufactured medicine (Oodoxin), had a significant Cenvat credit balance due to the higher duty on inputs compared to the final product. Upon closing the factory, the appellant sought a cash refund of the accumulated Cenvat credit, which was rejected by the lower authorities. The appellant relied on the precedent set by the Karnataka High Court in the case of Union of India vs. Slovak India Trading Co. Pvt. Ltd., which ruled that Rule 5 does not expressly prohibit the refund of Cenvat credit in the case of factory closure. The Supreme Court dismissed the SLP against this decision, thereby affirming the High Court's ruling. Other High Courts and Tribunals have followed this precedent, supporting the appellant's claim for a refund. The principle established is that the credit is indefeasible and should be refunded if it cannot be utilized due to factory closure. Issue 2: Provision for Refund on Factory Closure The Tribunal's stance that there is no provision for refunding accumulated Cenvat credit upon factory closure was contested. The appellant cited multiple cases where similar refunds were granted, including decisions by the Bombay High Court and the Delhi High Court, which supported the refund of Cenvat credit in cases of factory closure. These judgments emphasized that the credit is a right accrued to the manufacturer and should be refunded if it cannot be utilized due to the closure of the manufacturing unit. Court's Observations and Decision: The Court noted the consistent judicial opinion across various High Courts and the Supreme Court affirming the right to a refund of Cenvat credit in cases of factory closure. The Court highlighted the importance of maintaining judicial discipline and adhering to established precedents. It was observed that the Tribunal is bound by the High Court judgments and should not distinguish them without substantial grounds. The Court concluded that the appellant was entitled to a refund of the accumulated Cenvat credit, aligning with the judicial precedents and the principles of estoppel, which prevent the department from taking a contrary stance after accepting similar decisions in other cases. Conclusion: The appeal was allowed in favor of the assessee. The Court approved the view of the Karnataka High Court, as confirmed by the Supreme Court, and ruled that the appellant is entitled to a refund of the accumulated Cenvat credit due to the closure of the factory. The Tribunal's decision was overturned, and the appellant's claim for a refund was upheld.
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