2010 (8) TMI 227 - AT - Central Excise

Cenvat credit Sale of part of factory and subsequent leasing of facilities back to assessee input and capital goods not removed from factory - not a case where the factory remained at the same place and only ownership changed - facilities were leased back immediately and throughout the period assessee continued to be the manufacturer - issue is to be decided in favour of the appellants - appeal is allowed

Summary

Issues:
1. Denial of cenvat credit on inputs and capital goods following the sale of the Allethrin business.
2. Interpretation of Rule 10 of Cenvat Credit Rules, 2004 regarding the lapse of credit on the date of sale of plant and machinery.
3. Comparison with a previous Tribunal case involving the sale of a division within a factory.

Analysis:
1. The case involved M/s. Bilag Industries Pvt. Limited, engaged in manufacturing Technical Grade Pesticide. The issue was the denial of cenvat credit on inputs and capital goods after the sale of the Allethrin business to M/s. Sumitomo Chemicals India Pvt. Limited. The Commissioner contended that the credit should have lapsed on the date of sale, as per Rule 10 of Cenvat Credit Rules, 2004. The Tribunal noted that the sale only involved part of the factory, and the facilities were leased back to Bilag. It was observed that the inputs and capital goods remained within the factory, and Bilag continued as the manufacturer. The Tribunal held that the provisions of Rule 10 did not apply in this case, as the entire factory was not transferred, and credit should be available based on the definitions of inputs and capital goods.

2. The Tribunal referred to a previous case involving M/s. Jamna Auto Industries Ltd., where a similar issue arose regarding the sale of a division within the factory. In that case, the Tribunal held that the specific provisions of the rules covering the change in ownership of the factory should apply, rather than the general provisions. The Tribunal set aside the demand for duty in that case, emphasizing that there was no physical removal of inputs and capital goods. The Tribunal found similarities between the two cases, highlighting that the sale in the present case was also only a part of the factory, and the facilities were leased back to the appellant.

3. The Tribunal distinguished the present case from the Commissioner's reliance on the case of CCE, Mumbai v. Ruby Mills Limited. In the Ruby Mills case, the spinning plant was shifted to another place, unlike in the present case where the factory remained at the same place, and only ownership changed. The Tribunal noted that the facilities were immediately leased back to Bilag, and they continued as the manufacturer throughout the period. Despite various arguments presented, the Tribunal concluded that the issue favored the appellants, allowing the appeal with consequential relief.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Ahmedabad, provides a comprehensive overview of the issues involved and the Tribunal's decision on each issue, citing relevant legal provisions and previous cases for a thorough understanding of the decision.