'No provision for refund of unused Cenvat credit if factory closes'

When a factory closes down, unutilised credit account would lapse, unless it resumes production

We are closing down one of our manufacturing units where we have a substantial amount of unutilised Cenvat credit of excise duty paid on inputs and capital goods and service tax paid on input services. We have claimed the benefit of Rule 10A of Cenvat Credit Rules, 2004 and transferred the special additional duty to one of our other units. Is it possible now to claim the refund of the remaining unutilised Cenvat credit balance? 

In the case Modipon Ltd. [2015 (324) ELT 0718 (Tri. Del)], the Tribunal held that “other than Rule 5 of the Cenvat Credit Rules, 2004, there is no provision either in Central Excise Act, 1944 or in any Rules made thereunder for cash refund of accumulated Cenvat Credit Rules, 2004. When a factory closes down, the Cenvat credit lying unutilised in its Cenvat credit account would lapse, unless the factory resumes production. In the event of the factory being taken over by another person, and resuming production, Rule 10 permits the transfer of Cenvat credit to the new owner subject to certain conditions. But there is no provision for cash refund of such unutilised credit.” In my opinion, this decision states the correct position, although an appeal against this decision has been admitted in the Allahabad High court. 

The EOU scheme was closed in favour of SEZ units. Are new EOUs are being allowed now?

The EOU scheme was never closed since its introduction in the early eighties. Even after the introduction of the SEZ scheme, the EOU scheme continues. So, you can set up an EOU now.  

How will imports be taxed under the GST regime?

Imports of goods and services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. On import of goods, this will be levied on the sum of assessable value and basic customs duty. Full and complete set-off will be available of the IGST paid on import of goods and services by way of input tax credit. 

We are registered as a first stage dealer. Are we required to take a separate registration as importer for passing on the Cenvat Credit of CVD and SAD paid on goods that we import? 

CBEC Circular no. 1032/20/2016-CX dated June 28, 2016 clarifies that an assessee who conducts business both as an importer and a first stage dealer may take only one registration, as he has been exempted from the requirement of taking a second registration. It may be noted that the facility is optional, and any assessee needing separate registration for his own business purposes, may so register. Also, such assessee shall also have the option of filing a single quarterly return giving details of transactions as a first stage dealer and an importer, one after the other in the same table of the return — viz, all transactions as first stage dealer during the return period shall be followed by all transactions as an importer during the same return period.

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