2013 (8) TMI 877 - AT - Central Excise

Transfer of unutilized Cenvat credit - Demerger of companies - Held that - If the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory with the specific provision for transfer of liabilities of such factory, then, the transferor will be allowed to transfer the Cenvat credit lying unutilized to the transferee company. - In the present case the factory has been transferred to appellant and if the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory with the specific provision for transfer of liabilities of such factory, then, the transferor will be allowed to transfer the Cenvat credit lying unutilized to the transferee company. there is a change in ownership and the appellant has taken over the liabilities of the transferor. From a plain reading of the provisions of the Cenvat Credit Rules, it is absolutely clear that the appellant is rightly entitled for the transfer of Cenvat credit as held by both the adjudicating and appellate authorities. - Tribunal held that the transferor can transfer the credit lying unutilized in its books of accounts to the transferee company on account of change in ownership of the factory. Therefore, we do not find any infirmity in the order passed by the lower authorities. - Decided against Revenue.

Summary

Issues:
Transfer of Cenvat credit on demerger under Rule 10(1) of the Cenvat Credit Rules, 2004.
Permissibility of Cenvat credit on certain iron and steel items as capital goods.

Analysis:
1. The appeal involved a dispute regarding the transfer of Cenvat credit amounting to &8377; 5,57,23,420/- from the previous company to the demerged company under Rule 10(1) of the Cenvat Credit Rules, 2004. The Revenue contended that Rule 10(1) does not explicitly mention "demerger" for such transfers. However, the lower appellate authority upheld the transfer, stating that the new company is entitled to the unutilized Cenvat credit. The Tribunal analyzed Rule 10(1) and cited precedents where transfer of credit was allowed on account of change in ownership. The Tribunal concluded that the transferor can transfer unutilized credit to the transferee company in cases of change in ownership, as in the present situation, where the factory was transferred due to demerger.

2. Another issue raised was the permissibility of claiming Cenvat credit on certain iron and steel products worth &8377; 5.36 lakhs as capital goods. The respondent argued that they did not claim credit for these items and were not seeking credit for the mentioned amount. The Tribunal acknowledged this submission and stated that the Revenue could verify if any such credit was taken, and if so, it should be reversed. The Tribunal did not find any fault in the lower authorities' decision to dismiss the Revenue's appeal regarding this issue.

3. The Tribunal's analysis of Rule 10(1) emphasized the provision for transferring Cenvat credit in cases of factory transfer due to a change in ownership, which included the situation of demerger. The Tribunal relied on previous judgments to support its decision. Additionally, the Tribunal addressed the issue of claimed credit on iron and steel items, noting the respondent's statement of not utilizing such credit and leaving room for verification by the Revenue. Ultimately, the Tribunal disposed of the appeal, upholding the decisions of the lower authorities on both issues.