2010 (6) TMI 437 - AT - Central Excise

Cenvat credit Transfer of credit assessee taking over running business of another along with installed machinery and factory premises on lease Transfer of credit availed by previous company denied as there was no transfer of raw materials Credit not deniable on above ground in as much as in present case no raw material available for transfer. Cenvat credit on waste - The duty paid cable waste received in the factory has been accounted for in the input register and its consumption has been shown in the manufacture of the final product. The final product manufactured out of the same is accounted for in the RG 1 Part-I register which stand cleared on payment of duty. As such to deny the benefit of waste and scarp on the ground that the same was not an input is not justified.

Issues:
Transfer of Cenvat credit from previous unit, eligibility under Rule 10 of Cenvat Credit Rules, 2004; Liability transfer requirement for credit transfer; Bar of limitation for demand raised after three years; Denial of credit on waste and scrap as input.

Analysis:

1. Transfer of Cenvat Credit:
The main issue in this case was whether the appellant was eligible for the transfer of credit available with the previous unit under Rule 10 of the Cenvat Credit Rules, 2004. The appellant had taken over a business and transferred the credit of duty available with the previous unit. The Revenue objected to this transfer, citing Rule 10(3) requirements, stating that credit transfer is allowed only if stock of inputs is also transferred along with the premises. The appellant failed to provide evidence that the credit available was of inputs transferred, leading to the denial of the benefit under Rule 10.

2. Liability Transfer Requirement:
The appellant argued that since there were no raw materials or finished goods at the time of transfer, the question of transferring them did not arise. They contended that the liabilities of the previous unit were undertaken by them, and they were willing to discharge any future dues. Citing precedents, the appellant highlighted that credit transfer should not be denied when a new unit takes over an old unit with capital goods and inputs. The Tribunal's decisions supported the appellant's stance that transfer of credit should not be denied due to lack of prior permission or unavailability of input stock.

3. Bar of Limitation:
Another crucial aspect of the judgment was the bar of limitation for the demand raised. The show cause notice was issued after three years from the surrender of the license by the previous unit. The appellant argued that since the Revenue was aware of the facts and undertakings at the time of transfer, the notice issued after three years was time-barred. The Tribunal agreed with this argument, stating that the notice issued in 2008 was clearly barred by limitation.

4. Denial of Credit on Waste and Scrap:
The appellant was denied credit on waste and scrap, amounting to Rs. 9,456, on the grounds that it was not considered an input for the final product. However, the appellant demonstrated that the waste and scrap were utilized in the manufacturing process and accounted for in their records. The Tribunal found that the denial of credit on waste and scrap was unjustified, especially considering that the final product manufactured using the waste and scrap was accounted for and cleared after duty payment.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal on merits and limitation, providing consequential relief to the appellant. The judgment highlighted the importance of compliance with Rule 10 for credit transfer, the necessity of liability transfer, the bar of limitation for demands, and the justification for considering waste and scrap as inputs in specific manufacturing processes.

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