Company entitled to refund of Cenvat credit lying in Cenvat credit account on closure of business

Last updated: 26 July 2021

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A company that ceased manufacturing activities and surrendered its registration was entitled to a refund of unutilised Cenvat credit. Despite initial rejection due to a lack of supporting documents and perceived absence of provisions for such refunds, the CESTAT, New Delhi, ruled in favour of the company. This decision was based on precedent from the Karnataka High Court and the Supreme Court, establishing the right to a cash refund of Cenvat credit upon business closure, along with interest.

Court :
CESTAT, New Delhi

Brief :
In M/s Nichiplast India Pvt. Ltd. v. Principal Commissioner CGST [Excise Appeal No. 50790 of 2019 decided on July 23, 2021], M/s Nichiplast India Pvt. Ltd. ('the Appellant') closed down their manufacturing activities and surrendered their Registration Certificate on June 28, 2017.

Citation :
Excise Appeal No. 50790 of 2019 decided on July 23, 2021

In M/s Nichiplast India Pvt. Ltd. v. Principal Commissioner CGST [Excise Appeal No. 50790 of 2019 decided on July 23, 2021], M/s Nichiplast India Pvt. Ltd. ('the Appellant') closed down their manufacturing activities and surrendered their Registration Certificate on June 28, 2017.

Subsequently, the Petitioner filed refund claim of unutilised Cenvat Credit in their account (reflected in their ER-1 return for June, 2017) on July 05, 2017.

A show cause notice dated August 14, 2017 ('SCN') was issued to the Appellants stating that there were no provisions under Central Excise Act, 1944 ('Central Excise Act') and Rules made thereunder to sanction refund in cash of unutilised Cenvat Credit on closure of the unit.

Order-in-Original- It was observed that the Appellants had not submitted the reliable supporting documents related to their refund claim and refund claim was rejected.

Order-in-Appeal- Held that thee is no such provision under the Central Excise Act and Rules made thereunder to sanction refund in cash of unutilised cenvat credit on closure of the unit.

The Hon’ble CESTAT, New Delhi relied on Hon’ble Karnataka High Court case of Union of India v. Slovak India Trading Company Pvt Ltd. [Civil Appeal No. 5/2006 dated July 07, 2006] which was subsequently upheld by Hon’ble Supreme Court to hold that the Appellant is entitled to refund of the amount of Cenvat Credit lying in their Cenvat Credit account on closure of business along with interest.

FAQ :

Yes, a company is entitled to a refund of unutilised Cenvat credit lying in its account on the closure of business, along with interest.

The company claimed a refund of unutilised Cenvat credit after closing its manufacturing activities, but the claim was initially rejected.

The refund was initially rejected because the company did not submit reliable supporting documents and it was believed there were no provisions under the Central Excise Act for such refunds.

The ruling relied on decisions from the Karnataka High Court and the Supreme Court in the case of Union of India v. Slovak India Trading Company Pvt Ltd.

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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