Whether cash refund is allowable in case duty paid under protest and Closing down of factory?

PJ/Case Laws/2012-13/1224

Case:-Lavkush Textiles Vs Commissioner of Central Excise, Jaipur

Citation:- 2012(282) E.L.T. 545 (Tri. – Del.)

Issue:- Whether cash refund is allowable in case duty paid under protest and Closing down of factory?

Brief Facts:-The Appellant were engaged in manufacture of ACSR conductor of Aluminum falling under Chapter 76 of the Central Excise Tariff Act, 1985. A Show Cause Notice was issued to the appellants demanding Excise duty of Rs. 204554/- out of which a demand of Rs. 176516/- was confirmed vide order in original No. 105/2005-C.E. dated 13.03.2005. Meanwhile the appellants had debited an amount of Rs. 63001/- under protest on 09.03.2005/- in their RG-23A Part-II register, which was appropriated by the above adjudication order. The appellants filed an appeal against the Order- in-Original before the commissioner who rejected their appeal. The Appellants filed further appeal in the Tribunal and the same was allowed vide Final Order No. 982-983/2005-C.E dated 01.12.2005 [2006 (194) E.L.T 288(Tri.)]. They filled a refund application for refunding the Cenvat credit of Rs. 63001/- in cash as they had surrendered registration certificate by the time the Tribunal gave the relief. But the adjudicating authority passed an order to the effect that cash refund of such Cenvat credit cannot be given to the Appellant because their factory had been closed. Aggrieved by the order the Appellants filled an Appeal before the Commissioner (A). The Commissioner (A) relied on the judgment of the larger Bench of CESTAT in the case of Gauri Plasticluture P. Ltd. V/s CCe-2006(202) E.L.T 199 and set aside the orders sanctioning the refund in cash and allowed the departmental appeal. Aggrieved by the order of the Commissioner (A), the Appellant have filed this Appeal.

Appellant’s Contention:-Appellant argued that he is not able to make use of Cenvat credit if refunded by way of credit in RG 23A Part II in their credit account, it is legally proper that the adjudicating authority granted the refund in cash and he relies on the following decisions:
1)    CCE vs. Koclzar Sung-up Acrylic Ltd.-2010(259)E.L.T 713
2)    Raymond Ltd. vs. CCE-2011(274)E.L.T 513
3)    CCE vs. Birla Textiles Mills -2011(21)S.T.R 340

Respondent’s Contention:-    The Respondent argued that the Appellants after debiting the amount of Rs. 63001/- in the credit account, they have not paid at any point of time any amount in cash or PLA and they were not entitled for refund of Cenvat credit in cash. The Respondent further submit that the Cenvat Credit Scheme nowhere envisaged refund of excise duty on inputs used in the manufacture of finished products through a scheme of cash refund except in the case of final products exported and In this case, the accumulation of credit was not on account of export of the goods and in such cases, the scheme does not envisage refund of credit in cash. This is the essence of the decision of the Tribunal in Gauri Plasticulture (supra). Therefore, the impugned order is proper and maintainable.

Reasoning of Judgment:- Tribunal held that the Cenvat Credit Scheme is not for granting refund of excise duty paid on inputs used in the manufacture of excisable goods. The scheme is for allowing utilization of duty paid on inputs for discharging duty liability on final products manufactured using such inputs. If the final products is not dutiable or if the duty incidence on final product is lower than that on the inputs, there is no provision in the scheme to give cash refund of credit accumulated. After accumulating credit, if the factory is closed down the position cannot change. There are a few cases where Tribunal had ordered cash refund of Cenvat credit in the case of assessees, who had closed down their factory. In a few of those cases the facts of the case were not examined in detail. In a few other cases cash refunds arose in situations where the assessee was compelled to make a deposit in a disputed case out of Cenvat credit Account and after such debit they had to pay excise duty on their final products using cash on the subsequent clearance and the situation was that if such debit in Cenvat credit account was not forced on the assessee they would not have been required to make such deposit through cash. After making payments through PLA they became eligible for refund of Cenvat credit by winning appeal proceedings. By that time the factory was closed and granting refund by credit in their Cenvat credit account would have been of no use to them and would not have compensated for the payment they were forced to make in PLA. In such situation it is proper that such refund on account of relief in appeal is granted by way of cash refund of Cenvat credit. Such orders passed in such situation have been canvassed before the Assistant Commissioner to get cash refund of Cenvat credit in this case also. But the Commissioner has properly analysed the facts with reference to the decision of the Larger Bench of the Tribunal in Gauri Plasticulture Pvt. Ltd. and held that such refund in cash is not warranted in the facts of this case.

Decision:- Appeal Rejected.

Comment:- As clearly said that the refund of cash was allowed to assessee in such cases because if the credit is allowed then it will be of no use for the manufacturer as the factory has closed down. But now the larger bench as well as this decision has come with the conclusion that the refund will be allowed only in those condition where the deposit in credit has resulted in cash payment by manufacturer on his clearance. Otherwise, the refund of such credit will not be allowed. A very logical reasoning given in this case.

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PJ/Case Laws/2012-13/1224

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