2010 (6) TMI 743 - AT - Central Excise

Summary

Issues:
1. Denial of Cenvat credit on merger of two units.
2. Denial of Cenvat credit of 50% on capital goods.

Analysis:

Issue 1: Denial of Cenvat credit on merger of two units
The appellant sought waiver of pre-deposit of Cenvat credit wrongly taken without permission and related penalty and interest. The counsel argued that denial of Cenvat credit was due to the merger of two units resulting in a single Registration. The lower authorities contended that permission for transfer of credit was required, which the appellant did not obtain. However, the appellant cited a precedent where permission was deemed unnecessary. The Tribunal noted that the Show Cause Notice did not allege non-transfer of goods but only lack of permission. Rule 10(3) of the Cenvat Credit Rules does not mandate prior permission but satisfaction of the Deputy/Assistant Commissioner for transfer. As the stocks were transferred to the new entity, the demand was deemed unsustainable. The Tribunal found a prima facie case for waiving the pre-deposit and stayed the recovery pending appeal.

Issue 2: Denial of Cenvat credit of 50% on capital goods
The second issue pertained to the denial of 50% Cenvat credit on capital goods received in different financial years. The appellant availed 100% credit in subsequent years, leading to denial by the lower authorities. The DR argued that Rule 4(2)(a) limits the credit to 50% in the same financial year. The appellant referenced Tribunal decisions to support their case. The Tribunal observed that Rule 4(2)(a) indeed restricts the credit to 50% in the same financial year. Since the appellant availed 100% credit in subsequent years, a prima facie case for waiving the pre-deposit was established. Consequently, the Tribunal allowed the application for waiver of pre-deposit and stayed the recovery until the appeal's disposal.

In conclusion, the Tribunal found in favor of the appellant on both issues, ruling in favor of waiving the pre-deposit amounts and staying the recovery pending appeal.