2023 (5) TMI 136 - AT - Central Excise

Refund of unutilized Cenvat credit - rejection on the ground that Rule 5 of Cenvat Credit Rules is not available for the purpose of refund that too after the closure of the factory - rejection also on the ground that post introduction of CGST Act the appellant has failed to transfer the closing balance of Cenvat credit through Trans-1 as was mandatory in terms of Section 140 of CGST Act 2017.

HELD THAT:- The perusal of provision of Rule 5, shows that the clause “where for any reason such adjustment has not been possible” of erstwhile Rule 5 stands deleted. This means that after the amendment, the Cenvat credit if could not be utilized for being considered towards payment of duty/service tax for any reason the refund thereof is no more possible. It is also observed that Rule 5 of the Cenvat credit permits cash refund of accumulated Cenvat credit only in the following circumstances :-

(1) The Cenvat credit which has accumulated and whose cash refund is sought is in respect of input/input service used in the manufacture of finished goods which have been exported out of India under bond or letter of undertaking or used in intermediate products cleared for export.

(2) The assessee is not in a position to utilize the Cenvat credit for payment of duty on finished goods cleared for home consumption or cleared for export under rebate claim.

(3) The exports have not been made by claiming draw-back or input duty rebate.

Though the appellant had relied upon the decision of Karnataka High Court in UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. [2006 (7) TMI 9 - KARNATAKA HIGH COURT] which was also confirmed by the Hon’ble Supreme Court but the said case declared that refund claims of Cenvat cannot be subjected to limitation of time irrespective. The period involved is prior or post amendment. In the present case, since the refund claim was filed under Rule 5 of Cenvat Credit Rules, 2004 and after it got amended after April 2012. The amended Rule 5 does not permit refund of such Cenvat credit which could not be utilized for any possible reason.

Other than Rule 5 of Cenvat Credit Rules, there is no other provision either in Cenvat Credit Rules, 2004 or in Central Excise Rules, 2002 for giving cash refund of the accumulated Cenvat credit. Even Section 11B of Central Excise Act is only for the refund of duty paid either through cash or through Cenvat credit or for the Cenvat credit wrongly reversed. Hence, this section cannot be invoked in cash refund of the unutilized Cenvat credit lying in the Cenvat account of the manufacturer at the time of closure of the factory.

This Tribunal in MODIPON LTD. (FORMERLY KNOWN AS MODIPON FIBRES CO.) VERSUS CCE, GHAZIABAD [2015 (2) TMI 301 - CESTAT NEW DELHI] has held that when a factory closes down the Cenvat credit lying unutilized in its Cenvat credit account shall lapse unless the factory resumes production - In the present case, it becomes clear that none of the condition as enumerated above for invoking Rule 5 gets satisfied. In addition, when admittedly, the appellant while registering into new GST regime has not filed Tran-1 showing the impugned unutilized Cenvat credit Section 140 of CGST Act resultantly cannot be invoked. The question of giving cash refund for unutilized lying Cenvat credit does not at all arises.

The Adjudicating Authority has not committed any error while holding that Rule 5 of Cenvat Credit Rules, 2004 cannot be invoked to sanction the refund of unutilized Cenvat credit lying with the appellant much prior to April, 2017 that too in cash as per Section 140 of CGST Act, 2017 - Appeal dismissed.