CX - Lack of statutory provision for grant of refund of credit lying unutilized at time of closure of factory and lack of safeguards, conditions and limitations to handle such eventuality - claim rightly rejected: CESTAT
By TIOL News Service
MUMBAI, JAN 19, 2017: AN Appeal was filed by the assessee whose claim for refund of Rs.1,70,621/- had been rejected by competent authority and which was concurred by the lower appellate authority.
The facts are that appellant had stopped production of goods in February 2007 and had a balance of Rs.1,70,621/- as on the date of closure. The refund claimed of this Modvat credit lying unutilized as on date of intimation of closure was rejected by lower authorities.
Before the CESTAT, the appellant placed reliance on the Tribunal decision in Slovak India Trading Co Limited which was upheld by Karnataka High Court - 2006-TIOL-469-HC-KAR-CX and affirmed by the Supreme Court. Reliance is also placed on the decision in Computer Graphics Ltd - 2016-TIOL-2199-CESTAT-MAD in support.
The AR drew attention to the decision of the Tribunal in M/s Scan Synthetics Ltd - 2016-TIOL-1915-CESTAT-DEL which considered the judgments in re Slovak India Trading Co Pvt. Ltd and in re Steel Strips.
The Single Member Bench observed –
+ The decision in re Slovak India Trading Co Pvt. Ltd - 2006-TIOL-469-HC-KAR-CX relies on the absence of an express prohibition in the statute for allowing such refunds.
+ The absence of a provision for refund also implies the absence of a mechanism for processing a refund claim. The safeguards, conditions and limitations that are specified in a mechanism designed for the specifically permitted situation of refunds may not necessarily apply to the situation of a manufacturer who closes the factory of production. It could also well lead to claims by functioning undertakings which would throw the entire scheme into disarray.
+ I notice the Hon'ble High Court of Karnataka has merely endorsed the principle of refund as ordered by the Tribunal without examining the applicability of the safeguards, conditions and limitations specified by Central Government in the refund mechanism. The Tribunal also does not appear to have considered that specific in deciding the principle that refund is allowable in re Slovak India Trading Co Pvt. Ltd.
+ On the other hand, the Larger Bench, in the decision in re Steel Strips - 2011-TIOL-656-CESTAT-DEL-LB, took note of the variance in the decision of another Larger Bench of the Tribunal in Gauri Plasticulture (P) Ltd - 2006-TIOL-1121-CESTAT-MUM-LB and that of the Hon'ble High Court of Karnataka in Union of India v. Slovak India Trading Co (P) Ltd both of which favoured the assessee. That the latter should prevail over the decision of the Larger Bench is, itself, in doubt as the Larger Bench had taken further note of the decision of the Hon'ble High Court of Calcutta in Rasoi Ltd vs. Union of India which has denied the scope for refund of credit as money.
+ It would appear that the decision in re Computer Graphics - 2016-TIOL-2199-CESTAT-MAD has been based on erroneous assumption that the judgment of the Hon'ble High Court would in all situations prevail over that of the Tribunal. That would be so in normal circumstances. The Larger Bench was, however, faced with the antipodal decisions of two High Courts and the mechanism of reference to Larger Bench is intended to induce consistency in the decisions of the Tribunal when confronted with such variances of persuasive value. Hence, the decision of the Larger Bench would in this context prevail over that of the Division Bench which rendered the ruling cited.
+ The Larger Bench has adduced to the lack of statutory provision for grant of refund of credit lying unutilized at the time of closure of a factory. I have referred also to the lack of safeguards, conditions and limitations to handle such eventuality and to which all refund claims are, necessarily, subject.
On the submissions of the appellant that the lower appellate authority has travelled beyond the show cause notice, the Bench observed that these would have been pertinent if the refund provision were to be extendable to the claim of appellant. Inasmuch as since the settled law holds otherwise, no purpose would be served in re-examining these lacunae in the claim, the Bench held.
Concluding that the refund claim is devoid of merit and there is no cause to interfere with the impugned order, the appeal was dismissed.
(See 2017-TIOL-165-CESTAT-MUM)
