An assessee is entitled to refund of unutilized credit balance lying in his account on closure of his unit in absence of any bar

An assessee is entitled to refund of unutilized credit balance lying in his account on closure of his unit in absence of any bar –   

In the instant case, Shalu Synthetics (P.) Ltd. (Appellant) closed  their manufacturing activities and submitted refund claim of Rs. 10,63,985/- which was the balance of unutilized Cenvat credit lying in their accounts in terms of Rule 5 of the Cenvat Credit Rules, 2004 (Credit Rules) and under the provisions of Section 11B of Central Excise Act, 1944 (Excise Act), which was rejected bythe Adjudicating authority. The Appellant preferred an appeal before the Commissioner (Appeals) against the order. The Commissioner (Appeals) upheld the orders of the Adjudicating authority on the ground that provisions of refund of Cenvat credit lying unutilized on account of closure of unit have probably not been made as there was no need for doing so as the duty paid on inputs used in the manufacturing of goods cleared on payment of duty stands included in the price of goods manufactured and is recovered by the manufacturers on the sale of such goods. Therefore, refund of such unutilized Cenvat credit shall be subject to unjust enrichment. The Appellant filed an appeal before the Hon’ble Ahmedabad Tribunal.

The Appellant submitted that the Appellant had accumulated credit and surrendered Central Excise registration at the time of closure of the factory. Accordingly, the refund shall be granted to the Appellant which has also been settled by various judicial pronouncements.

The Hon’ble Tribunal observed that there is no dispute as to the fact that amount lying in balance in the Cenvat credit account of the Appellant. Further, it was noted that refund of the unutilized Cenvat credit does not fall under any of the rules and that there are no express or implicit provisions in the Excise Act and the Credit Rules for grant of refund of Cenvat Credit balance lying unutilized at the time of closure of the unit.

The Hon’ble CESTAT relied on the judicial pronouncements of Union of India v. Slovak India Trading Co. (P.) Ltd. [2006 (201) ELT 559 (Kar.)] and CCE v. Jain Vanguard Polybutylene Ltd. [Central Excise Appeal No. 450 of 2010, dated 28-6- 2010]wherein it was held that refund of unutilized Cenvat credit shall be allowed to the assessee in the absence of any bar in the Credit Rules or the Excise Act.

Accordingly, the contention of the Revenue was rejected and case was decided in the favour of the Appellant.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)