2008 (1) TMI 776 - AT - Central Excise

Summary

Issues:
Transfer of Cenvat credit to another unit on shifting of capital goods.

Analysis:
The appeal arose from an Order-in-Appeal confirming the denial of Cenvat credit by the Commissioner (Appeals) due to the transfer of capital goods to another unit. The appellant argued that they followed the correct procedure by transporting the goods and debiting the Cenvat credit. The key issue was whether the assessee could transfer the credit to their own unit. The Tribunal referred to a previous judgment in the case of M/s. Hewlett Packard (India) Sales (P) Ltd. where a similar issue was decided in favor of the assessee.

The Tribunal examined the facts and law in detail. It was established that the amalgamation of units had taken place, and the unutilized Cenvat credit was intended to be transferred to the Bangalore unit. Rule 10 of the Cenvat Credit Rules, 2004 allowed for the transfer of credit in such circumstances. The authorities did not dispute the availability of unutilized credit, confirming the appellant's entitlement to the transfer under Rule 10(1).

Regarding the lapse of accumulated credit, the Commissioner (Appeals) incorrectly concluded that the credit would lapse due to product exemption. However, Rule 11 of the Cenvat Credit Rules, 2004 provided for transitional provisions, ensuring the availability of unutilized credit for transfer. The Tribunal disagreed with the Commissioner's interpretation and held that the credit was transferable.

The Tribunal also addressed the requirement of prior permission for credit transfer, clarifying that Rule 10 did not mandate obtaining prior permission. Referring to a previous case, it was established that as long as inputs and capital goods were accounted for to the satisfaction of the Department, credit transfer was permissible without prior permission.

Furthermore, the Tribunal discussed the condition under Rule 10(3) regarding the transfer of inputs along with credit. Since the appellant had already reversed the credit on inputs, this condition did not apply, as the reversed amount was not part of the transferable credit. Therefore, the Tribunal concluded that the appellant was entitled to transfer the unutilized credit to the Bangalore unit.

Based on the above analysis and following the precedent set in the case of Hewlett Packard (India) Sales (P) Ltd., the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief if any. The transfer of credit by the appellant to their own unit after payment of duty was deemed proper, and the initial denial of credit was found to be incorrect in law.