Tribunal rules that refund of unutilized CENVAT credit is admissible in case of closure of unit

This Tax Alert on the recent ruling of the Chennai Tribunal in the case of Srinivasa Hair Industries vs CCE (Appeal No. E/497/2011), wherein, relying on the decision in the case of Union of India vs Slovak India Trading Co. P. Ltd [2006 (201) ELT 559], assessee claimed refund of unutilised CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 (CCR). The assessee was unable to utilise CENVAT credit due to closure of unit.

The Tribunal observed that Rule 5 of CCR deals with refund of unutilised CENVAT credit in respect of export of goods and there is no rule for refund of credit in respect of input used in manufacture for domestic clearance.

However, cases where assessees are not able to use the unutilised CENVAT credit due to closure of their business or any other circumstances beyond their control, law cannot be interpreted to cause absurdity.

Relying on the decision in the case of Slovak India Trading Co. P. Ltd (supra), as referred to by the assessee, Tribunal allowed the appeal and held that refund in case of closure of unit is admissible.