Refund of unutilized CENVAT credit on factory closure held admissible under Rule 5, with rejection of claim set aside.

Refund of unutilized CENVAT credit on closure of the factory was held admissible because the credit accumulated against duty suffered on inputs, capital goods and input services is meant for set-off against duty liability, and Rule 5 of the CENVAT Credit Rules, 2002 does not expressly prohibit refund after manufacturing has ceased. Following binding precedent, CESTAT Chennai set aside the rejection of the refund claim and allowed relief to the assessee.

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Issues: Whether refund of unutilized CENVAT credit was admissible on closure of the factory.

Analysis: The claim for refund was rejected on the premise that there was no express provision permitting refund of credit lying unutilized in the CENVAT account. The Tribunal held that CENVAT credit is accumulated over time against duty suffered on inputs, capital goods and input services and is intended to be utilized against duty liability. It followed binding precedent that Rule 5 of the CENVAT Credit Rules, 2002 does not expressly prohibit refund of such credit where manufacturing has ceased on closure of the factory, and treated the issue as already settled by the higher courts.

Conclusion: Refund of unutilized CENVAT credit on closure of the factory was held admissible, and the rejection of the refund claim was set aside in favour of the assessee.

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