2019 (1) TMI 58 - AT - Central Excise

Refund of un-utilized Cenvat Credit lying balance on closure of factory - Held that - It was held in the case of Gauri Plasticulture 2006 (8) TMI 225 - CESTAT, MUMBAI that whenever assessee was unable to utilize the credit on account of objection raised by the Department and paid duty in cash, they would be entitled to refund of credit in cash - decided in favour of assessee - appeal dismissed - decided against Revenue.

Summary

Issues:
Refund of un-utilized Cenvat Credit on closure of factory.

Analysis:
The appellant filed an application for a refund of un-utilized Cenvat Credit on the closure of their factory amounting to around ?21 lakhs. The Original Authority rejected the refund, but the Learned Commissioner (Appeals) allowed it, relying on a decision of the Tribunal in a similar case. The Revenue appealed this decision before the CESTAT ALLAHABAD.

The Revenue argued that as per a Larger Bench Decision in the case of Steel Strips vs. Commissioner of Central Excise, Ludhiana, there is no provision under Rule 5 of Cenvat Credit Rules, 2004 to allow a refund of un-utilized Cenvat lying in the Cenvat Account on the closure of the factory. They also contended that Rule 5 does not permit a refund of Cenvat Credit on capital goods.

On the other hand, the respondent's Chartered Accountant cited a subsequent decision of the Tribunal in the case of Commissioner of Central Excise vs. Jai Ganpati Metals, where it was held that the decision of the Hon’ble Karnataka High Court in a specific case prevails over the Larger Bench's decision. The Karnataka High Court ruled that under those circumstances, Rule 5 of Cenvat Credit Rule was not applicable, eliminating the question of refund on account of capital goods. The Chartered Accountant also referred to another decision of the Tribunal in the case of Gauri Plasticulture (P) Ltd. vs. Commissioner of Central Excise, Indore, where it was established that if an assessee is unable to utilize the credit due to objections raised by the Department and pays duty in cash, they are entitled to a refund of credit in cash once the dispute is settled in their favor.

The CESTAT ALLAHABAD, through Member (Technical) Anil G. Shakkarwar, noted that the Tribunal's decision to allow a refund of un-utilized Cenvat Credit on the closure of a manufacturing unit had been upheld by the Hon’ble High Court of Allahabad. Consequently, the appeal filed by the Revenue was rejected, as there was no merit found in their arguments.

In conclusion, the judgment affirms the right to claim a refund of un-utilized Cenvat Credit on the closure of a manufacturing unit, based on the precedents set by previous Tribunal decisions and the subsequent validation by the Hon’ble High Court of Allahabad.