CENVAT service and closure of the Company

[Ametek Instruments India Private Limited]

Whether the balance in CENVAT service tax account is refundable if we close the company? if yes, is there any time limit applicable and what is the procedure to be followed.

The company was carrying on domestic business and not an STPI or EOU unit.

Thanks

Ajith

[Rajagopalan Ranganathan]

Sir,

When you close down your company and business, the department will not refund the credit balance available in your credit account. It will lapse.

[Mahir S]

In the case of Shalu Synthetics (P.) Ltd. Vs. Commissioner of Central Excise & Service Tax, Vapi 2014 (6) TMI 343 - CESTAT AHMEDABAD, it has been held that an assessee is entitled to refund of unutilized creditbalance lying in his account on closure of his unit in absence of any bar.

[KASTURI SETHI]

No, refund in cash is not admissible on account of closure of the factory except in export case. As per Rule 3(4) (e) of Cenvat Credit Rules, input service credit can be utilized only for providing taxable output service.If credit has been accumulated because of export and remains un-utilized and you want to close business, then refund in cash is admissible. Since you have sufficient time to close the business, better option is to utilize the same, otherwise it would lapse. There is a plethora of judgements on this issue but it varies from case to case. There is no use of going into litigation unnecessarily.The Department will never allow refund in cash except in export case. The department is legally strong in not allowing refund in cash inasmuch as there is no confusion in Rule 3(4)(e) of Cenvat Credit Rules.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Kasthuri Sethi.

[KASTURI SETHI]

Sh.MARIAPPAN GOVINDARAJAN JI,

Thanks a lot. Sir.

[Mahir S]

COMMR. OF C. EX. & CUS. (APPEALS), TIRUPATI Versus KORES (INDIA) LTD.

2008 (8) TMI 588 - CESTAT, BANGALORE

Cash refund - Cenvat credit on capital goods - Rule 5 of the Cenvat Credit Rules - the respondents closed the unit, as the unit is closed they would not be in a position to utilize the Cenvat credit - there is plethora of case-laws which hold that when the amount lying in the Cenvat account cannot be utilized then the assessees are entitled for cash refund - The amount lying unutilized on account of the closure of the factory in the Cenvat credit should be refunded - Decided in favor of the assessee.

[KASTURI SETHI]

I have already mentioned in my reply dated 3.1.15 that there is a plethora of judgements on this issue. Refund in cash will not be sanctioned by the department because that will be in violation of Rule 3 (4) (e) of the Credit Rules. In case the assessee opts for the route of litigation, the sword of uncertainty is hanging. There are contradictory decisions depending upon the facts and circumstances of each case.

[DR.MARIAPPAN GOVINDARAJAN]

In 'Modipon Limited V. Commissioner of Central Excise, Ghaziabad' - 2015 (324) ELT 718 (Tri. Del) = 2015 (2) TMI 301 - CESTAT NEW DELHI the Tribunal held that there is no provision of cash refund of accumulated CENVAT due to stoppage of production under Section 11B of Central Excise Act, 1944 which is applicable only to duty paid on goods either through cash or CENVAT credit. In case of closure of factory unutilized credit would lapse unless production is resumed by assessee or by another if the said factory is sold or hired out. Other than Rule 5 of CENVAT Credit Rules, 2004 there is no provision under law for cash refund or accumulated credit. Refund under Rule 5 is subject to condition that accumulated credit is to be in respect of inputs used in manufacture of export goods or assessee isnot in a position to utilize the said accumulated credit for payment of duty on finished goods for home consumption or for export. None of the conditions is satisfied by the appellant. Therefore the refund is not admissible.

[Mahir S]

Ajith ji,

You should during closure of your factory, apply for refund for the unutilized cenvat credit with the department with relevant documents showing unutilized credits.

You have nothing to lose due to the reason that, even if the decision does not come in your favour, you shall have neither to pay any Duty, Interest or Penalty.

Just you have to make a refund application and keep track of the same at Divisional level and thereafter at Commissioner (Appeals) level about your refund case.

There are even High Court judgements on the said issue which are clearly in favour of the assessee. So don’t hesitate, just make a refund application without any delay.

Regarding time limit, you can make it before closure of the factory. Reg. procedure, you have to make a refund application in prescribed form and fill up necessary details alongwith relevant documents.

[KASTURI SETHI]

It is better not to comment on any judgement of any court. You understand very well. No need to explain.

[Mahir S]

Whatever views are being expressed, though are personal views but written only after complete research and backed by facts.

Such facts can be provided , if need arises.

Further, Just mentioning case laws does not mean that comments are being passed on the judgments of the Courts. Such case laws have being cited by various experts on the Forum since its inception.

AI Summary

Company Queries CENVAT Credit Refund on Closure; Experts Cite Rule 3(4)(e) and Case Law, Recommend Utilization Before Closure. A discussion on a forum involves a company inquiring about the refund of the CENVAT service tax balance upon closure. Responses vary: one expert states that the credit balance will lapse and is not refundable, while another references a case allowing refunds of unutilized credits upon closure. Others argue that cash refunds are generally not permissible except in export cases, citing Rule 3(4)(e) of the Cenvat Credit Rules. Despite differing opinions and case law references, the consensus leans towards utilizing credits before closure to avoid loss, as litigation outcomes are uncertain.