Cash refund of unutilised MODVAT credit on factory closure denied absent express statutory authority.

Cash refund of unutilised MODVAT credit on closure of a factory is not allowable unless the statute expressly provides for it and prescribes a refund mechanism. The Tribunal applied the Larger Bench view that fiscal benefits under the credit scheme require strict compliance with the statutory framework, and equity cannot create a refund right where none exists. It further held that a Division Bench decision following a High Court ruling could not override the contrary Larger Bench position on the same issue. The claim for refund was rejected and the impugned order was upheld.

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Issues: Whether unutilised MODVAT credit lying in the books on closure of the factory could be refunded in cash to the manufacturer.

Analysis: The Tribunal held that refund of accumulated credit is not available merely because the factory has ceased production. It relied on the Larger Bench view that fiscal benefits of refund are governed by strict compliance with the statutory scheme and that, in the absence of an express provision and accompanying refund mechanism for such a situation, equity cannot supply the omission. The Tribunal further held that a Division Bench decision following a High Court ruling could not prevail over the contrary Larger Bench view on the same issue, particularly where the Larger Bench had considered the relevant legal position and the limits of refund under the statute.

Conclusion: The claim for cash refund of unutilised MODVAT credit was rejected and the impugned order was upheld.

Final Conclusion: The appeal failed because the law did not permit cash refund of unutilised credit on closure of the factory in the absence of statutory authority.

Ratio Decidendi: Refund of credit under a fiscal scheme requires express statutory authority and strict compliance with the prescribed mechanism; in the absence of such provision, cash refund of unutilised MODVAT credit on closure of business is not allowable.

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