The Ahmedabad CESTAT allowed cash refund of CENVAT Credit on factory closure.
The genesis of the controversy dealing with admissibility of cash refund of CENVAT credit can be traced back to the case of Slovak India. The Karnataka HC had rejected an Appeal filed by the Revenue challenging the grant of cash refund of CENVAT balance on account of factory closure. Aggrieved, the Revenue filed an SLP before SC. The SC had dismissed the SLP on the ground that ld. ASG had conceded that the decisions of Tribunals, wherein cash refund on factory closure had been granted were not appealed against.
Post the SC judgement, the question was raised before the Bombay HC in RE: Gauri Plasticulture, whether the doctrine of merger would apply to the judgement of the SC in Slovak India and whether the same could be read as a declaration of law under Art. 141 of the Constitution. The Bombay HC answered in the negative on the premise that the SLP had been dismissed without ascertaining any reasons by the Apex Court.
Mumbai Tribunal has essentially negated the judgement of the jurisdictional Bombay HC, by holding that the doctrine of merger would apply in the case of Slovak India. It was observed that the findings of the Bombay HC cannot be said to be conclusive as another decision of the SC in RE: Gangadhar Palo was not considered. In the said case, the Apex Court had held that even if the SLP is dismissed with reasons, however meagre (one sentence), there is a merger of orders. Accordingly, the SC judgement in Slovak India has to be read as a declaration of law and cash refund of CENVAT balance can be granted even in absence of express provision.
The CESTAT held that Input credit is an indefeasible right of an assessee and such right conferred under the statue cannot be taken away on the ground of limitation. Even if the time limit u/s. 11B of the Excise Act is to be applied, the same should be effective from the date of surrender of the registration certificate upon closure of the factory.
The provision for refund u/s. 54 (much like the corresponding refund provision u/s. 11B of the Excise Act) enumerates a limited number of scenarios wherein cash refund can be granted. Notably, the GST refund provision also does not expressly provide refund on account of closure of business. However, if, for any reason, businesses under the GST regime are closed and refund of accumulated ITC is to be claimed, the instant decision has set the doors open for similar reliefs in the GST Regime as well.
Case Title: ATV Projects India Limited V/s Commissioner Of Central Excise And Service Tax-Raigad