2019 (1) TMI 968 - AT - Central Excise

Tribunal grants refund of unutilized Cenvat credit upon factory closure

M/s Shree Flavours LLP Versus CCE, Delhi

The Tribunal allowed the appeal, granting the appellant a refund of unutilized Cenvat credit upon the closure of their factory. The Tribunal held that the ... Cash refund of unutilized credit - closure of factory - due procedure has been followed by the appellant by informing the department about such closure - denial of credit on the ground that the refund of unutilised credit is not admissible to the appellant by way of granting cash refund under the provisions of Rule 17 of Chewing Tobacco and Unmanufactured Tobacco Packing Machine Rules 2010 - Held that:- In the case of Delphi-TVS Diesel Systems Ltd. Vs. CESTAT, Chennai [2015 (9) TMI 774 - MADRAS HIGH COURT], it is held that rules being subordinate legislation, cannot prescribe anything different than prescribed in the Act, rules can occupy a field that is not occupied by Statute. The rule cannot occupy a field i.e. already occupied of the statute. In view of the above judgement, the Hon’ble High Court its very much intention that the ground taken by the first appellate authority to reject the refund scheme is not sustainable in the eyes of law. By application of aforesaid ratio in the present case, we find that by application of grant of refund inadmissible to the appellant needs to be refunded back to the appellant. We find that there are many decisions of the Tribunal as well as the superior Courts, that the Cenvat credit lying with the appellant is also a duty and cannot be treated separately as compared to the Revenue in PLA account. Thus, the appellant is entitled to refund of the Cenvat credit lying unutilised at the time of closure of their factory - appeal allowed - decided in favor of appellant. Issues Involved:1. Admissibility of refund of unutilized Cenvat credit upon closure of a factory.2. Interpretation of the provisions under the Chewing Tobacco and Unmanufactured Tobacco Packing Machine Rules, 2010.3. Applicability of Cenvat Credit Rules, 2004 in the context of the Chewing Tobacco Rules, 2010.Detailed Analysis:1. Admissibility of Refund of Unutilized Cenvat Credit:The appellant, engaged in the manufacture of chewing tobacco, surrendered their Central Excise Registration Certificate and subsequently filed for a refund of unutilized Cenvat credit. The original adjudicating authority and the Commissioner (Appeals) rejected the refund claim, stating that the refund of unutilized credit is not admissible as per Rule 17 of the Chewing Tobacco Rules, 2010. The appellant contended that they had complied with all procedural requirements and that the refund should be granted.2. Interpretation of the Chewing Tobacco and Unmanufactured Tobacco Packing Machine Rules, 2010:The Commissioner (Appeals) held that the Chewing Tobacco Rules, 2010 do not provide for the refund of unutilized credit. The appellant argued that the provisions of Rule 5 of the Cenvat Credit Rules, 2004, read with Section 11B of the Central Excise Act, 1944, should apply, allowing for the refund of such credit. The Commissioner (Appeals) rejected this argument, stating that Rule 16(7) of the Chewing Tobacco Rules specifically restricts the availment of credit to the provisions of this rule, rendering the Cenvat Credit Rules, 2004 inapplicable.3. Applicability of Cenvat Credit Rules, 2004:The appellant cited various judgments to support their claim that the credit availed on input material is equivalent to duty paid in cash and should be refundable. The Tribunal examined Rule 17 of the Chewing Tobacco Rules, which outlines the procedure for calculating duty payable upon cessation of factory operations. The Tribunal noted that Rule 16(7) of the Chewing Tobacco Rules states that no other provisions of the Cenvat Credit Rules, 2004 apply to notified goods, except as provided in the rule itself.Judgment:The Tribunal found that the interpretation by the Revenue was not acceptable. It referenced several judgments, including the case of Delphi-TVS Diesel Systems Ltd. Vs. CESTAT, Chennai, which held that rules being subordinate legislation cannot prescribe anything different from what is prescribed in the Act. The Tribunal concluded that the appellant is entitled to a refund of the unutilized Cenvat credit lying in the balance at the time of factory closure. The Tribunal allowed the appeal, granting the appellant the refund along with consequential benefits as per law.Conclusion:The Tribunal held that the appellant is entitled to the refund of unutilized Cenvat credit upon the closure of their factory, overturning the decisions of the lower authorities. The Tribunal emphasized that the provisions of the Cenvat Credit Rules, 2004 are applicable and that the credit availed should be treated as duty paid. The appeal was allowed with consequential benefits.