CX - Respondents are not entitled to refund of accumulated credit lying in their accounts unless they are able to show that they are fulfilling conditions prescribed under Rule 5 of CCR and notification issued thereunder: CESTAT
By TIOL News Service
MUMBAI, JULY 01, 2016: THIS is a Revenue appeal filed in the year 2008.
The respondent opted to avail full exemption by claiming the benefit of Notification No. 30/2004-CE dated 09/07/2004 with effect from 16/03/2005. At the time of opting out, the appellant had balance of AED (TTA) of Rs.14,73,718/- to their credit. The respondent filed a refund claim under Rule 5 of CCR & relied on the decision of High Court of Karnataka in the case of Slovak India Trading Co. Pvt. Ltd. – 2006-TIOL-469-HC-KAR-CX . The refund claim was rejected by the original authority. However,it was allowed by the Commissioner (A) and, therefore, the Revenue is in appeal before the Tribunal.
The matter was heard recently.
The AR submitted that Rule 5 of CCR, 2004 permits refund of CENVAT Credit subject to certain conditions; that inability to utilise credit due to export of finished goods is only reason on which the credit can be allowed. It is further pointed out that in the case of Steel Strips Vs. CCE, Ludhiana – 2011-TIOL-656-CESTAT-DEL-LB, the larger bench, after examining the cited High Court decision, held that there is no provision for refund of unutilized/accumulated Cenvat credit on closure of unit. Furthermore, no evidence had been produced by the assessee to indicate that the credit claimed as refund pertains to export goods.So also the refund claimed on 12/03/2007 of the balance lying as on 16/03/2005 is clearly time barred.
The respondent while continuing to rely on the Karnataka High Court decision (supra) also drew support from the Bombay HC decision in Jain Vanguard Polybutylene Ltd. – 2010-TIOL-911-HC-MUM-CX. It is also informed that consequent to favourable order by the Commissioner (Appeals), the said amount has been refunded to them on 30/01/2009 and this order sanctioning refund has not been challenged by the Revenue.
The Bench after narrating the facts involved in the case of Slovak India observed -
++ it is seen that in the said case there was a dispute regarding the admissibility of Cenvat Credit when the unit was in operation and it was held to be admissible after the unit closed down. In these circumstances on equitable ground it was held that refund of such credit could be granted in cash under Rule 5 of the Cenvat Credit Rules. I find that in the case of Arcoy Industries and Babu Textile Industries (supra) also the facts were similar. In both the cases the refund of earlier period was sanctioned after the unit had either closed down or gone out of Cenvat Credit scheme. It is seen that there are two distinct stages. First the refund of credit has to be admissible and second the recipient had meanwhile lost ability to use the credit (either by way of closure or exemption or otherwise). These were the conditions noticed in facts which were considered while allowing refund of Cenvat Credit in cash.
++ in terms of the decision of Larger bench in Steel Strips Vs. CCE, Ludhiana – 2011-TIOL-656-CESTAT-DEL-LB, which has been given after examining the decision of Hon'ble High Court in case of Slovak (supra), the respondents are not entitled to refund of accumulated credit lying in their accounts unless they are able to show that they are fulfilling the conditions prescribed under Rule 5 of the Cenvat Credit Rules and the notification issued there under. The respondents have not done so.
++ the respondents have claimed that refund has been sanctioned to them in the year 2009 and the same cannot be recovered as the said order has not been challenged by the Revenue. The Hon'ble Supreme Court in the case of Woodcraft Products Ltd. – 2002-TIOL-825-SC-CX-LB has observed as under:
3. ...We asked learned Counsel whether the reversal by this Court of the Tribunal's order on classification would not, by itself, require the assessee to make restitution of the sums that the Revenue had refunded to it pursuant to the Tribunal's order. Learned Counsel fairly stated that such restitution was requisite.
4. Plainly, the assessee is obliged to make restitution. The Revenue honoured the Tribunal's order and made the refund. Upon the reversal by this Court of the Tribunal's order, the assessee was bound in law to restitute the amounts of such refund to the Revenue.
In fine, the Revenue appeal was allowed.
In passing: A pyrrhic victory?
(See 2016-TIOL-1589-CESTAT-MUM)
