2023 (8) TMI 243 - AT - Central Excise

Appellant denied refund of unutilised CENVAT credit upon factory closure based on legal precedents.

The Tribunal, relying on High Court and Supreme Court precedents, held that the appellant is not entitled to a refund of unutilised credit in their CENVAT ... Refund of unutilised CENVAT credit - closure of factory - construction of Rule 5 of the Cenvat Credit Rules - precedential effect of dismissal of Special Leave Petition - judicial discipline and persuasive value of Tribunal/High Court decisionsRefund of unutilised CENVAT credit - closure of factory - construction of Rule 5 of the Cenvat Credit Rules - precedential effect of dismissal of Special Leave Petition - Eligibility for refund of unutilised credit standing in CENVAT account on cessation of manufacture and sale/closure of the factory. - HELD THAT: - The Tribunal considered whether the appellant was entitled to cash refund of the accumulated CENVAT credit on account of cessation of manufacturing and sale of the factory. Having examined the decision of the Bombay High Court in Gauri Plasticulture Pvt. Ltd., which analysed the Karnataka High Court view in Union of India v. Slovak India Trading Co. and the aftermath of the Supreme Court dismissals of Special Leave Petitions, the Tribunal held that the question of law on entitlement to refund remained open and that the Bombay High Court's conclusion - that refund cannot be granted - is applicable to the facts of the present case. The Tribunal noted that the dismissal of Special Leave Petitions in earlier matters did not constitute a binding declaration under Article 141 and that the High Court in Gauri Plasticulture had considered these aspects and answered the relevant questions against grant of refund. Applying that reasoning to the identical facts before it, the Tribunal concluded that the appellant's claim for cash refund of the unutilised CENVAT credit must be rejected. [Paras 7, 8]Refund of the unutilised CENVAT credit on closure/sale of the factory is not allowable; the appellant's appeal is dismissed.Final Conclusion: The appeal is dismissed; the claim for refund of accumulated CENVAT credit on cessation of manufacture/sale of the factory is refused in view of the reasoning in Gauri Plasticulture and the applicable precedential considerations. Issues involved: The issue is whether the appellant is eligible for refund of unutilised credit lying in their CENVAT account at the time of closing the factory.Detailed Judgment:Issue 1: Eligibility for refund of unutilised creditThe appellant, a manufacturing factory, ceased operations and sold assets to another company. Subsequently, the appellant filed a refund claim for the unutilised credit in their CENVAT account. The department issued a show cause notice proposing to deny the refund claim, which was rejected by the Original authority and upheld by the Commissioner appeals. The appellant argued that they are eligible for a refund based on previous decisions. The High Court of Bombay in the case of Gauri Plasticulture Pvt. Ltd. considered a similar issue and held that the refund cannot be granted. The High Court of Karnataka in the case of Union of India Vs Slovak India Trading Co. Pvt. Ltd. observed that there is no express prohibition in Rule 5 to refund unutilised CENVAT credit. The Tribunal consistently allowed such claims when the unit is closed, and the assessee is out of the Modvat Scheme. The High Court of Karnataka held that even if there is no manufacture due to factory closure, the assessee is eligible for cash refund. The Supreme Court dismissed the appeal by the Revenue, keeping the question of law open. Based on the above, the Tribunal concluded that the refund cannot be allowed, and the appeal by the appellant was dismissed.Conclusion:The Tribunal, following the precedent set by the High Court and Supreme Court decisions, ruled that the appellant is not eligible for a refund of unutilised credit in their CENVAT account upon closing the factory. The appeal was dismissed accordingly.