No refund of outstanding CENVAT credit after closure of factory

Last updated: 11 August 2023

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The CESTAT Chennai ruled that a company is not entitled to a refund of its unutilised CENVAT credit after ceasing manufacturing operations and selling its business. The tribunal followed a precedent set by the Bombay High Court in a similar case, denying the refund claim.

Court :
CESTAT, Chennai

Brief :
The CESTAT, Chennai in M/s. Alfred Berg & Co., (I) Pvt. Ltd. v. The Commissioner of GST and Central Excise [Excise Appeal No. 41009/2018 dated August 02, 2023] held that no refund of unutilized CENVAT credit after stopping manufacturing due to sale of business to another company.

Citation :
Excise Appeal No. 41009/2018 dated August 02, 2023

The CESTAT, Chennai in M/s. Alfred Berg & Co., (I) Pvt. Ltd. v. The Commissioner of GST and Central Excise [Excise Appeal No. 41009/2018 dated August 02, 2023] held that no refund of unutilized CENVAT credit after stopping manufacturing due to sale of business to another company.

Facts

M/s. Alfred Berg & Co., (I) Pvt. Ltd. ("the Appellant") was a manufacturer who had stopped their manufacturing activities and sold the assets to another company. The Appellant then filed a refund claim of the accumulated balance of CENVAT credit ("the Credit").

A show cause notice proposing denial of the refund claim was issued to the Appellant. Subsequently, the adjudicating authority passed an order ("the Impugned Order") rejecting the refund claim.

Aggrieved by the Impugned Order, the Appellant filed an appeal before the CESTAT, Chennai.

Issue

Whether the Appellant is eligible for a refund of the credit outstanding in their CENVAT account at the time of closing of factory?

Held

The CESTAT, Chennai in Excise Appeal No. 41009/2018 held as under: -

Noted that, the facts of the present case are similar as in Gauri Plasticulture Pvt. Ltd. v. Commissioner of Customs Excise, Indore 2019 (30) GSTL 224 (Bom.) wherein the Hon’ble Bombay High Court denied the refund of CENVAT credit to the assessee after closure of factory.
Held that, the Appellant is not eligible for a refund of the credit outstanding in their CENVAT account at the time of closure of his factory.

FAQ :

No, the CESTAT Chennai has held that a company is not eligible for a refund of outstanding CENVAT credit after closing its factory and stopping manufacturing.

The company, M/s. Alfred Berg & Co., (I) Pvt. Ltd., stopped manufacturing, sold its assets, and then claimed a refund of its accumulated CENVAT credit balance.

The refund claim was rejected by the adjudicating authority and this decision was upheld by the CESTAT Chennai.

Yes, the CESTAT Chennai noted that the facts were similar to a Bombay High Court ruling in the case of Gauri Plasticulture Pvt. Ltd. v. Commissioner of Customs Excise, Indore, which also denied a refund of CENVAT credit after factory closure.

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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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