Cash refund of CENVAT credit after factory closure upheld where adjustment was no longer possible.

Rajasthan HC held that where a manufacturing unit had closed and the refund claim under Rule 5 of the CENVAT Credit Rules, 2002 had already crystallised, the assessee was entitled to receive the refund in cash. The court noted that Rule 5 permits refund when adjustment is not possible and contains no express bar on cash payment. As no manufacturing activity remained in which the credit could be utilised, denial of cash refund was unjustified, and the contrary Larger Bench view was considered misplaced. The issue was answered in favour of the assessee and against the Revenue.

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Issues: Whether, on closure of the manufacturing unit and after crystallisation of the refund claim, the assessee was entitled to cash refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2002.

Analysis: Rule 5 allows refund of the amount where adjustment is not possible and does not contain any express prohibition against payment of that refund in cash. The credit claim had already been adjudicated in favour of the assessee, the manufacturing unit had closed, and no manufacturing activity remained in which the credit could be utilised. In these circumstances, denial of cash refund was held to be unjustified, and reliance on the contrary Larger Bench view was found misplaced.

Conclusion: The assessee was entitled to cash refund of the CENVAT credit, and the question was answered in favour of the assessee and against the Revenue.

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