Accumulated CENVAT credit refund on factory closure upheld, with limitation not defeating a prompt claim after registration surrender.

Accumulated CENVAT credit was treated as refundable on closure of a manufacturing unit because the scheme is intended to prevent cascading of duty, and credit lawfully earned on inputs and input services could not be denied merely due to cessation of operations. Rule 5 of the CENVAT Credit Rules, 2004 was identified as the operative refund provision, and in the absence of an express prohibition, the balance credit remained refundable. The limitation rule under Section 11B of the Central Excise Act, 1944 was held not to defeat the claim where the factory had closed and the refund was filed promptly after surrender of registration.

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Issues: Whether refund of accumulated CENVAT credit was admissible on closure of the manufacturing unit, and whether the claim was barred by limitation.

Analysis: The CENVAT scheme is a beneficial framework intended to avoid cascading of duty. Credit lawfully availed on inputs and input services, and retained in the credit account until closure of the factory, could not be denied merely because the unit had stopped operations. Rule 5 of the CENVAT Credit Rules, 2004 was treated as the operative refund provision, and in the absence of an express prohibition, accumulated credit was held refundable. The limitation principle under Section 11B of the Central Excise Act, 1944 was held not to defeat the claim in the circumstances of factory closure and prompt filing after surrender of registration.

Conclusion: Refund of accumulated CENVAT credit was held admissible and the claim was not barred by limitation.

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