Custom, Excise & Service Tax Tribunal
M/S. Srinivasa Hair Industries vs Cce, Chennai Ii on 2 March, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. E/497/2011
(Arising out of Order-in-Appeal No.34/2011 (M-II) dated 25.8.2011 passed by the Commissioner of Central Excise (Appeals), Chennai)
M/s. Srinivasa Hair Industries Appellant
Vs.
CCE, Chennai II Respondent
Appearance Shri S. Muthuvenkataraman, Advocate for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent CORAM Honble Shri D.N. Panda, Judicial Member Date of Hearing / Decision: 02.03.2016 Final Order No. 40411 / 2016 It is submission of the appellant that the CENVAT credit remaining unutilized may be refunded under Rule 5 of the CENVAT Credit Rules, 2004 since the credit so remaining has no possibility of utilization in future, because of the closure of the unit. Appellant relies on the decision of the Honble High Court of Karnataka upheld in the case of Union of India Vs. Slovak India Trading Co. P. Ltd. 2008 (223) ELT A170 (SC) to buttress its claim.
2. Learned AR on the other hand says that there is no rule prescribed to consider the case of refund of unutilized CENVAT credit where input credit does not relate to manufacture of exportable goods or intermediate cleared for export. Rule 5 confines its scope to permissibility of the refund only in respect of exportable goods. When the input credit is availed to manufacture goods for domestic clearance, unutilized CENVAT credit is not refundable in absence of any statutory provision in law.
3. Heard both sides and perused the record.
4. Revenue is correct in its proposition that Rule 5 only takes care of the cases where unutilized input credit pertains to manufacture of exportable goods or intermediate goods cleared for export. There is no rule at all to entertain refund of the unutilized CENVAT credit in respect of use of the input in the manufacture for domestic clearances. However, cases where assessees are not able to use the unutilized CENVAT credit due to closure of their business or any other circumstances beyond their control, law cannot be interpreted to cause absurdity or impossibility. With such interpretation, the Honble High Court of Karnataka has allowed refund in the case of Union of India Vs. Slovak India Trading Co. P. Ltd. (supra) considering the fact that there was neither production nor clearance of finished goods due to closure of the company. The Court considered grant of relief on the premise that in absence of any prohibition in terms of Rule 5, refund is permissible. But, it may be stated that scope of Rule 5 is confined to exportable goods. That does not take care of the domestic clearances. Therefore, when the credit is not questioned as ungenuine and there is no circumstance brought out by Revenue that there is a possibility to utilize the credit and also there being no law to carry forward such credit for future or to transfer the same to others, in such circumstance, it may be considered that the duty element paid by the assessee to the treasury shall serve no useful purpose of the taxpayer in the event of closure of the unit or impossibility of adjustment. The State should not be enriched at the cost of the citizen in such circumstance following the ratio laid down in (i) Salonah Tea company Ltd. Etc. Vs. Superintendent of Taxes, Nowgong & Ors. Etc. 1988 (33) ELT 249 (SC); (ii) HMM Ltd. Vs. Administrator, Bangalore City Corporation 1997 (91) ELT 27 (SC) and (iii) Union of India Vs. ITC Ltd. 1993 (67) ELT 3 (SC).
5. While deciding the case, the judgment of the Honble High Court of Andhra Pradesh in the case of CCE, Hyderabad Vs. Apex Drugs & Intermediates Ltd. 2015 (322) ELT 834 (A.P) has been placed in the Bar. That being a case relating to exportable goods that is covered by Rule 5 and quite distinct on facts from the decision in the case of Honble High Court of Karnataka (supra).
6. In the result, appeal is allowed and refund is admissible.
(Dictated and pronounced in open court) (D.N. Panda) Judicial Member Rex 4