MODIPON LTD. Vs. COMMISSIONER OF C. EX., GHAZIABAD

JUDGEMENT

(1.) THE appellants are manufacturers of Nylon filament yarn chargeable to Central Excise duty.

(2.) They availed Cenvat credit of Central Excise duty paid on inputs and capital goods used in or in relation to manufacture of final product as per the provisions of Cenvat Credit Rules, 2004. The appellants' factory stopped production in June, 2007 and at that time they had accumulated Cenvat credit of Rs. 2,35,86,612/ - in their RG 23A Part -II and RG 23C Part -II account. On 27 -11 -2007, the appellant filed refund claim invoking Section 11B(2)(C) of the Central Excise Act, 1944. The refund application mentions that the company has stopped production since June, 2007 due to stiff competition, that the Cenvat credit of Rs. 2,35,86,612/ - in its Cenvat credit account is lying unutilized, that there is no possibility utilizing said credit in any near future as there is no chance of resumption of the operations of the factory and therefore, the company requests refund of the Cenvat credit under clause (C) of provisions of Section 11B(2) of the Central Excise Act, 1944. Section 11B of Central Excise Act, 1944 is about refund of the duty and clause (c) of Provisions of Section 11B(2) provides that the bar of unjust enrichment would not be applicable to the refund of credit of duty paid on any excisable goods used as inputs in accordance with the rules made or any notification issued under this Act. The application, citing the judgment of Hon'ble Karnataka High Court in case of UOI v. Slovak India Trading Co. Pvt. Ltd. [ : 2006 (201) E.L.T. 559 (Kar.)] requested for cash refund of the unutilized Cenvat credit of Rs. 2,35,86,612/ - under Rule 5 of the Cenvat Credit Rules, 2004. The refund claim was rejected by the Asstt. Commissioner vide Order -in -Original dated 16 -6 -2008, against which the appellant filed an appeal to Commissioner (Appeals). The Commissioner (Appeals) vide Order -in -Appeal dated 30th December, 2008 rejected the appeal observing that the judgment of Hon'ble Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. (supra) is not applicable to this case and that the cash refund under Rule 5 of the Cenvat Credit Rules, 2004 is permissible only of the accumulated Cenvat credit which is in respect of the inputs which have been used in or in relation to manufacture of finished goods which have been exported under bond/letter of undertaking without payment of duty and which cannot be utilized for payment of duty on the goods cleared for home consumption or for payment of duty on the goods cleared for export under rebate claim. Against this order of the Commissioner (Appeals) this appeal has been filed.

(3.) SHRI S.S. Dabas, Advocate, the Ld. Counsel for the appellant assailed the impugned order by mainly relying upon Hon'ble Karnataka High Court judgment in the case of Slovak India Trading Co. Pvt. Ltd. (supra) and pleaded that in terms of this judgment of Hon'ble Karnataka High Court, there is no express prohibition in Rule 5 of the Cenvat Credit Rules, 2004 against permitting cash refund of the accumulated Cenvat credit, that for cash refund of the accumulated Cenvat credit, it is not necessary that the Cenvat credit should be in respect of the inputs used in or in relation to manufacture of final products exported out of India without payment of duty under bond/LTU, that cash refund would be admissible, even if, a factory stops production and at the time of stopping of the production, some unutilized Cenvat credit is lying in Cenvat credit account, that he also relies upon the Tribunal's judgment in the case of Raymond Ltd. v. CCE, Mumbai -III reported in, 2011 (273) E.L.T. 582, wherein the Tribunal held that the assessees would be eligible for the refund of unutilized accumulated credit on opting out of Modvat Scheme, excluding the reversed credit involved in inputs, work in process and finished goods lying in stock on the date of opting out of Modvat Scheme, and that in terms of Apex Court's judgment in the case of Collector v. Dai -Ichi Karkaria Ltd. [ : 1999 (112) E.L.T. 353 (S.C.)], the credit once allowed to an assessee cannot become indefeasible as it is as good as tax paid. He, therefore, pleaded that impugned order is not correct.