2009 (2) TMI 649 - AT - Central Excise

Stay/Dispensation of pre-deposit - Cenvat/Modvat - conversion of DTA to a 100% EOU - rule 10 of CENVAT Credit Rules

Summary

Issues:
1. Transfer of Modvat credit from DTA to 100% EOU.
2. Applicability of Rule 10 of Cenvat Credit Rules, 2004.
3. Denial of transfer leading to demand, interest, and penalty.

Transfer of Modvat Credit:
The appellant, initially a DTA availing Modvat credit, was converted to a 100% EOU with a balance credit of Rs. 1,04,84,090. The appellant applied for transfer of this credit, which was granted by the Assistant Commissioner. However, a show cause notice was later issued, alleging ineligibility for the transfer as Rule 10 of the Cenvat Credit Rules, 2004, which allows such transfer, was deemed inapplicable in this case.

Applicability of Rule 10:
The dispute revolved around the interpretation of Rule 10 concerning the transfer of credit from DTA to 100% EOU. The Revenue objected to the transfer, citing the absence of specific provisions in Rule 10 for such a scenario. However, upon examination, it was found that Rule 10 did not explicitly exclude such transfers upon conversion. The appellant's status change did not necessitate transfer, and the Assistant Commissioner's approval was not challenged within the stipulated time frame.

Denial of Transfer and Judicial Analysis:
The Tribunal noted that the appellant, despite the change in status, remained the same entity eligible to avail and utilize the credit. The Revenue's objection centered on Rule 10's alleged inapplicability. However, the Tribunal found no prohibition in Rule 10 for the transfer in question. Moreover, the delay in issuing the show cause notice post the transfer request further supported the appellant's case. Consequently, the Tribunal ruled in favor of the appellant, allowing the stay petition unconditionally.

This judgment highlights the importance of scrutinizing relevant rules and timelines in credit transfer cases, emphasizing the need for clear provisions to guide such transactions to avoid disputes and ensure procedural fairness.