2010 (5) TMI 737 - AT - Central Excise

Summary

Issues:
Transfer of unutilized credit from one manufacturing unit to another under Rule 10 of Cenvat Credit Rules, 2004.

Analysis:
The case involved the transfer of unutilized credit from M/s. Disha Industries to M/s. Shiel Industries, both owned by the same proprietor, Shri Arun Choksi. The department objected to the transfer of unutilized credit amounting to Rs. 9,74,895.69 and imposed a penalty of Rs. 1,00,000. The department's stand was that the unutilized credit in M/s. Disha Industries would lapse, and M/s. Shiel Industries could not claim it back even if the demanded duty was paid. The appellant argued that the transfer was covered under Rule 10, which allows the transfer of credit when a manufacturer shifts the factory. The Commissioner (Appeals) had held that the two firms should be treated as separate manufacturers, contrary to the appellant's contention that they should be treated as a single manufacturer due to the same proprietor. The Tribunal differentiated a previous case involving a public limited company transferring credit between units, stating that the current case involved a manufacturer shifting the factory, making Rule 10 applicable.

The Tribunal found merit in the appellant's argument that the case fell within the purview of Rule 10, allowing the transfer of credit and unutilized balance when a manufacturer relocates the factory. The only issue raised by the department was the change in the name of the new unit receiving the inputs and capital goods. The Tribunal granted a stay against the recovery of the demanded amount during the appeal's pendency and waived the requirement of pre-deposit. The decision was based on the understanding that the situation aligned with the provisions of Rule 10 of the Cenvat Credit Rules, 2004, facilitating the transfer of credit in cases of factory relocation.

This judgment clarifies the applicability of Rule 10 in cases of transferring unutilized credit between manufacturing units owned by the same proprietor. It emphasizes the importance of considering the specific circumstances of factory relocation and the ownership structure in determining the eligibility for credit transfer. The Tribunal's decision provides guidance on interpreting and applying relevant rules and regulations governing credit transfers in the context of manufacturing unit relocations.