2019 (9) TMI 16 - AT - Central Excise

Tribunal denies refund claims for unutilized CENVAT credit upon business closure.

The Tribunal dismissed the appeals of M/s Idol Textile Ltd and M/s Balaji Prints Ltd, affirming that they were not entitled to refunds of unutilized ... Refund claim - CENVAT credit account that remained unutilized upon closure of business and surrender of registration certificate - HELD THAT:- Tribunal in COMMR. OF CUS. & C. EX., BHOPAL VERSUS BOMBAY BURMAH TRADING CORPN. LTD. [2005 (8) TMI 178 - CESTAT, NEW DELHI] and in COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-I VERSUS ARCOY INDUSTRIES [2004 (4) TMI 175 - CESTAT, MUMBAI] , was considering the appeal of Revenue against the sanction, in cash, of refund of duties collected without authority of law and relief had been granted even though collected through debit of the MODVAT/CENVAT credit account. In these, as well as that of the Larger Bench in GAURI PLASTICULTURE (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [2006 (8) TMI 225 - CESTAT, MUMBAI] , it has been held that cash refund is not precluded even if duty was not paid in cash. All these pertained to ongoing business where the discharge of duty liability itself was in dispute - The present proceedings arise, not from discharge of duty liability on the part of appellant but of credit taken on discharge of duty liability by their suppliers. The issue decided in the case of VOLTAS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE PUNE IV [2018 (4) TMI 352 - CESTAT MUMBAI] where it was held that It is clear that legislative intent did not envisage the monetisation of CENVAT credit in the event of impossibility of utilisation. CENVAT Credit Rules, 2004 is not an exemption scheme but a contrivance to ensure that the incidence of duty or tax is borne by the ultimate purchaser of goods or service in a chain. Appeal dismissed. Issues Involved:1. Legality and propriety of the rejection of claims for refund of unutilized CENVAT credit upon closure of business and surrender of registration certificate.2. Applicability of precedent decisions regarding the refund of unutilized CENVAT credit.3. Interpretation of Rule 5 of the CENVAT Credit Rules, 2004 concerning refund of unutilized credit.4. Examination of legislative intent behind the CENVAT Credit Rules, 2004.Issue-wise Detailed Analysis:1. Legality and Propriety of Rejection of Claims for Refund of Unutilized CENVAT Credit:The core issue revolves around the rejection of refund claims amounting to Rs. 24,72,465 and Rs. 12,40,173 by the competent authority, upheld by the Commissioner of Central Excise (Appeals), Mumbai Zone-I. The appellants argued that the unutilized credit constituted duties of central excise paid in cash, comparable to unutilized balances in the 'personal ledger account.' However, the Tribunal found that the present proceedings did not arise from the discharge of duty liability by the appellant but from credit taken on the discharge of duty liability by their suppliers.2. Applicability of Precedent Decisions:The Tribunal considered various precedents, including decisions in Voltas Ltd v. Commissioner of Central Excise, Commissioner of Customs v. Bombay Burmah Trading Corporation Ltd, and others. The Tribunal noted that the cited cases dealt with ongoing businesses where the discharge of duty liability was in dispute, unlike the present case involving business closure. The Tribunal emphasized that the decision in Slovak India Trading Co Pvt Ltd by the High Court of Karnataka, which allowed refunds upon business closure, was not applicable due to a subsequent decision by the High Court of Bombay in Gauri Plasticulture (P) Ltd v. Commissioner of Central Excise, Indore et al.3. Interpretation of Rule 5 of the CENVAT Credit Rules, 2004:The Tribunal examined Rule 5 of the CENVAT Credit Rules, 2004, which pertains to the refund of unutilized credit. The High Court of Bombay, in Gauri Plasticulture (P) Ltd, clarified that Rule 5 did not permit the refund of unutilized credit unless the inputs were used for final products cleared for export. The Tribunal concluded that merely having unutilized inputs due to business closure did not entitle the assessee to claim a refund of CENVAT credit.4. Examination of Legislative Intent Behind the CENVAT Credit Rules, 2004:The Tribunal highlighted that the legislative intent behind the CENVAT Credit Rules, 2004, was to prevent the cascading effect of taxes and not to provide an exemption scheme. The rules allowed the discharge of tax liability through cash deposits or CENVAT credit, ensuring that the tax burden ultimately rested on the final consumer. The Tribunal emphasized that converting unutilized credit into cash refunds would contradict this intent, as it would imply that the duty or tax collected at the preceding stage was without authority of law, which was not the case.Conclusion:The Tribunal concluded that the appeals of M/s Idol Textile Ltd and M/s Balaji Prints Ltd lacked merit and dismissed them, affirming that the appellants were not entitled to refunds of unutilized CENVAT credit upon business closure. The decision was pronounced in open court on 29/08/2019.