2026 (2) TMI 1332 - AT - Central Excise

Refund of Unutilized CENVAT Credit: permitted on closure when claimed within the statutory period measured from surrender.

Rule 5 of the Cenvat Credit Rules, 2004 permits refund of accumulated unutilized CENVAT credit where inputs or input services were used in manufacture for ... Entitlement to refund of unutilized CENVAT credit under Rule 5 - Eligibility of input services used in manufacture of exported goods - Applicability of limitation under Section 11B to refund claims under Rule 5 - Relevant date for limitation upon closure and surrender of registration - Scope of remand and limits on raising new grounds in de-novo adjudication - HELD THAT:- In M/s. Gauri Plasticulture [2019 (6) TMI 820 - BOMBAY HIGH COURT], we find that refund pertains to inputs lying in stock without being used in the manufacture of products. Further we find that issue was considered by jurisdiction Hon’ble High Court of Karnataka in the matter of M/s. Slovak India Trading Co. Pvt. Ltd. [2006 (7) TMI 9 - KARNATAKA HIGH COURT], held that ' There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for the purpose of rejection as rightly ruled by the Tribunal. The Tribunal has noticed that various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. ' The issue was also considered by the Tribunal in the matter of M/s. ATV Projects India Pvt., Ltd., Vs. CC [2023 (9) TMI 802 - CESTAT MUMBAI], majority it is held that:- ' availment of cenvat credit is an indefeasible right of an assessee and such right conferred under the statue cannot be taken away on the ground of limitation. Further, Rule 5 ibid does not prescribe any time limit for grant of refund of the cenvat credit. Even if the time limit under section 11B ibid is to be applied, then logically it should be effective from the date of surrender of the registration certificate upon closure of the factory. The appellant in this case, since has filed the refund application within a reasonable time frame, from the date of closure of the factory, in my opinion, the same should not be denied on the ground of limitation, inasmuch as the purpose of the cenvat scheme would be defeated, if the benefits accrued in lawful manner is denied.” We find in the present appeal, though the closure of export were done in June, 2008, it has exited from EOU in 2011 and closure of factory and surrender of Central Excise registration was done only on 30.07.2013 and refund claim was filed on 12.04.2014. Even if it is assumed that the provisions of Notification No. 27/2012-CE(N.T) dated 18.06.2012 are applied, refund cannot be denied, since it is filed within one year from the date of closure of the business activity. As regards other issues, it is well settled that eligibility of a claim cannot be questioned when refund claim is made under Rule 5 of CENVAT Credit Rules, 2004 for refund of the unutilized CENVAT credit lying in their books of account. Further as held in the matter of M/s. Simplex Engineering & Foundry Works Pvt., Ltd.[2019 (6) TMI 820 - BOMBAY HIGH COURT], such issues were not the matter of dispute when the first round of adjudication was conducted and Adjudication authority required to act within the scope of remand during the de-novo proceedings and they cannot reject the refund claim on a ground which was not part of the first adjudication / appellate proceedings. Thus, the impugned order is unsustainable and liable to be set aside. Issues: Whether the appellant is entitled to refund of unutilized CENVAT credit under Rule 5 of the Cenvat Credit Rules, 2004 and whether the limitation period under Section 11B of the Central Excise Act, 1944 bars the refund claim.Analysis: Rule 5 of the Cenvat Credit Rules, 2004 permits refund of CENVAT credit where inputs or input services used in manufacture for export cannot be adjusted; Notification No. 5/2006-C.E. specifies safeguards including a reference to time limits in Section 11B. Relevant judicial precedents cited interpret Rule 5 and associated notifications to allow refund of accumulated CENVAT credit on closure/surrender where the credit was genuinely availed for export production and cannot be utilized. Where a factory surrenders registration and claims accumulated unutilized credit, the relevant date for limitation is the date of closure/surrender and claims filed within the prescribed period from that date are treated as within time. During remand adjudication authorities must confine themselves to grounds remitted and cannot raise fresh eligibility objections that were not part of the original adjudication if the earlier proceedings did not permit such examination. In the present case the appellant surrendered registration on 30.07.2013 and filed the refund claim on 12.04.2014; the claimed credit relates to input services used in manufacture/export though some service tax payments and credit availment occurred belatedly with interest. The Tribunal relied on binding and persuasive authorities holding that Rule 5 allows refund of accumulated CENVAT credit on closure and that limitation under Section 11B does not defeat genuine refund claims filed in the statutory window from surrender/closure.Conclusion: The appeal is allowed and the impugned order rejecting the refund claim is set aside; the appellant is entitled to refund of the unutilized CENVAT credit in accordance with Rule 5 of the Cenvat Credit Rules, 2004 and applicable notifications and law.Ratio Decidendi: Refund of accumulated unutilized CENVAT credit under Rule 5 of the Cenvat Credit Rules, 2004 is available where inputs or input services were used in manufacture for export and, on surrender/closure, the unutilized credit cannot be adjusted; such refund claims are not defeated by limitation under Section 11B when filed within the relevant period measured from closure/surrender.