2026 (1) TMI 389 - AT - Central Excise

Factory closure and unutilized CENVAT credit refund claim u/r 5 after 01.04.2012 amendment rejected

Refund of unutilized CENVAT credit on closure of a manufacturing unit was denied because, after the 01.04.2012 amendment to Rule 5 of the CCR, 2004, ... Admissibility of refund of unutilized credit on account of closure of the manufacturing unit - HELD THAT:- Before 01.04.2012, Rule 5 gives scope for refund of CENVAT credit for the reason that the same cannot be utilized because of exports or for any other reason. It is found that after Rule 5 (ii), it is mentioned that where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification. However, after amendment w.e.f. 01.04.2012, Rule 5(1) provides that a manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette. Thus, it is seen that the Rule w.e.f 01.04.2012 provides that refund of unutilized CENVAT credit only in the cases where the credit could not be utilized on account of exports and not for any other reason. If the Rule 5 does not provide for refund of CENVAT credit on any other account other than export w.e.f. 01.04.2012 the appellants are not eligible for refund of CENVAT credit on closure of the factory - the Tribunal being the creature of Statute, cannot go beyond the four corners of law and interpret the statutory position for a situation which is not provided for in the said Statute. Therefore, the appeal is not maintainable on that count. Another submission of the appellant is that the OIO dated 14.04.2015 and the OIA dated 02.07.2019 have gone beyond the grounds of rejection stated in the SCN dated 22.01.2015 - It is found that the impugned SCN has clearly proposed rejection of refund claim under the provisions of Rule 5 of CCR,2004 read with Section 11B of the CEA,1944 and therefore, there is no merit in the submissions of the appellant. Appeal dismissed. Issues: Whether refund of unutilized CENVAT credit on closure of the manufacturing unit is admissible to the assessee under Section 11B(2)(c) of the Central Excise Act, 1944 and the CENVAT Credit Rules, 2004.Analysis: The Court examined Section 11B(2)(c) which makes refunds of duty credit subject to rules and notifications, and analysed Rule 5 of the CENVAT Credit Rules, 2004 in its pre-amendment and post-amendment forms. Prior to 01.04.2012, Rule 5 permitted refunds where adjustment was not possible for export or 'for any other reason'. After the amendment effective 01.04.2012, Rule 5(1) confines refund entitlement to situations connected with export (using a formula based on export turnover and net CENVAT credit) and does not provide for refunds on closure of a factory for reasons other than export. The Tribunal applied this statutory scheme, considered conflicting precedents, noted the temporal applicability of earlier authorities, and assessed factual contentions regarding utilisation of credit after the refund claim and surrender of registration. The Tribunal concluded that refunds must be governed strictly by the Rules and Notifications and that Rule 5 as amended does not allow refund on closure except in export-related circumstances.Conclusion: Refund of unutilized CENVAT credit on closure of the factory is not admissible under the statutory scheme as amended w.e.f. 01.04.2012; the appellant's claim is therefore not maintainable and the appeal fails in favour of the revenue.Final Conclusion: The statutory amendment to Rule 5 of the CENVAT Credit Rules, 2004 narrows refund entitlement to export-related situations; accordingly, claims for refund of unutilized CENVAT credit on closure of a manufacturing unit (other than export cases) cannot be granted under Section 11B(2)(c) read with the Rules and Notifications.Ratio Decidendi: As amended w.e.f. 01.04.2012, Rule 5 of the CENVAT Credit Rules, 2004 confines refund of CENVAT credit to export-related situations and does not permit refund of unutilized CENVAT credit on closure of a factory for non-export reasons; refunds under Section 11B(2)(c) are therefore available only to the extent provided by the Rules and Notifications.