2006(07)LCX0039

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

R. Gururajan and Jawad Rahim, JJ.

Union of India

Versus

Slovak India Trading Co. Pvt. Ltd.

C.E.A. No. 5/2006, decided on 7-7-2006

Advocated By -

REPRESENTED BY: Shri S.N. Rajendra, Advocate, for the Appellant.
Shri K.S. Ravi Shankar, Advocate, for the Respondent.

[Judgment].

- The Union of India is before us raising the following questions of law in para 17 in the light of the order of the Tribunal dated 9-8-2005 passed in Excise Appeal No. 934/2004 on the file of the Customs, Excise and service Tax Appellate Tribunal, Bangalore.

(a) Whether under the facts and circumstances of the case the Tribunal is right in ordering for refund even if there is no provision in Rule 5 of Cenvat Credit Rules 2002, to refund the unutilized Credit?

(b) Whether under the facts and circumstances of the case the Tribunal is right in ordering for refund even if there is no production arid there is no clearance of finished goods?


(c) Whether under the facts and circumstances of the case the Tribunal is right in holding that respondent is entitled for refund even if it goes out of Modvat Scheme or Company is closed?

2. Respondent-company is engaged in manufacture of shoes for M/s. Bata India Ltd. They are registered under the Central Excise Registration. The respondent surrendered their registration. A refund application was made on 14-5-2003 claiming a refund of Rs. 4,15,057/- During the Internal Audit, it was noticed that the assessee has availed Cenvat Credit of the materials received by them during the past on the strength of the photocopies of the duplicate copy of invoices and the original copies of the invoices were never produced. The assessee had availed the credit to the tune of Rs. 3,09,390/-. On scrutiny, it was noticed that there was neither production nor clearance of finished goods. Cenvat Credit availed by the respondent is irregular. A show cause notice was issued in the matter with regard to irregular availment and also with regard to rejection of refund claim. Reply was submitted. Thereafter, an order was passed ordering allowance of Cenvat Credit of Rs. 3,72,405/- availed on the invoices mentioned in the show cause notice except invoice No. 62 dated 19-2-2002. Refund claim was also rejected in terms of Sec. 11B of the Act. It was stated that there is no provision in Rule 5 of Cenvat Credit Rules, 2002 with regard to refund. An unsuccessful appeal was filed by the assessee. Thereafter, he moved the Tribunal and the Tribunal has chosen to allow the appeal in terms of the impugned order. It is in these circumstances, the Revenue is before us raising the above referred questions of law.


3. Heard the learned Counsel appearing for the appellant and perused the material placed on record.

4. Admitted facts would reveal of a claim of cash refund and admitted facts would reveal of rejection at the hands of the Assistant Commissioner and also the appellate authority. The Tribunal has chosen to allow the claim application on the ground that refund cannot be rejected when the assessee goes out of Modvat scheme or when the Company is closed. The argument is that there is no provision for refund in terms of Rule 5 of Cenvat Credit Rules, 2002. Rule 5 reads as under:

"Rule 5. Refund of CENVAT Credit: When any inputs are used in the final products which are cleared for export under bond or letter of under taking, as the case may be, or used in the intermediate products cleared for export, the CENVAT credit in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export on payment of duty and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitations as may be specified by the Central Government by notification:

Provided that no refund of credit shall be allowed if the manufacturer avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty."

5. There is no express prohibition in terms of Rule 5. Even otherwise, it refers to a manufacturer as we see from Rule 5 itself. Admittedly, in the case on hand, there is no manufacture in the light of closure of the Company. Therefore, Rule 5 is not available for the purpose of rejection as rightly ruled by the Tribunal. The Tribunal has noticed that various case laws in which similar claims were allowed. The Tribunal, in our view, is fully justified in ordering refund particularly in the light of the closure of the factory and in the light of the assessee coming out of the Modvat Scheme. In these circumstances, we answer all the three questions as framed in para 17 against the Revenue and in favour of the assessee.


6. Ordered accordingly. No costs.

Equivalent 2006 (201) ELT 0559 (Kar.)

Equivalent 2008 (010) STR 0101 (Kar.)