2011 (4) TMI 413 - AT - Central Excise

Cenvat credit - Manufacture of P.U. Foam Sheets/regular blocks - shortage of cenvated inputs - Verification of the stock of inputs had been done in presence of Asstt. Manager of the appellant-company - Asstt. Manager at that time was fully satisfied with the manner of stock taking and had not raised any objection and at that time, he could not give any explanation about the shortage, other than saying that the shortage may be due to short receipt of the raw materials over a period of time and also due to shrinkage - Held that - the appellant s plea at the appellate stage that missing quantity of Irregular P.U. Foam Blocks was lying in the manufacturing area but was not taken into account, cannot be accepted - Thus,that Cenvat credit demand of Rs. 84,201.85 in respect of shortage of cenvated Irregular P.U. Foam Blocks had been rightly upheld. Transfer of Cenvat Credit - Rule 8 of the Cenvat Credit Rules, 2002 - The shareholders and directors of co., who have changed - the owner of the factory is the appellant-company and it is only the shares of company which have been purchased by different persons - - The control of appellant-company has changed but the appellant-company continues to be the owner of the factory - Rule 8 is attracted only when the factory shifts to another site, or its ownership is transferred on account of sale to another per son or the ownership is changed on account of merger, amalgamation, lease or transfer of the factory to a joint venture, which is not the case here - Held that the Cenvat credit demand of Rs. 4,37,697.36 is not sustainable and the same is set aside - Decided in favour of assessee.

Summary

Issues:
1. Dispute over shortage of cenvated inputs.
2. Cenvat credit balance and ownership change implications.

Issue 1: Dispute over shortage of cenvated inputs:
The case involved a dispute regarding the shortage of P.U. Foam Irregular Blocks, which was found during a physical verification. The appellant argued that the missing quantity was part of the stock in the manufacturing area, but the tribunal rejected this explanation. The tribunal upheld the demand for Cenvat credit of Rs. 84,201.85 related to the shortage of cenvated Irregular P.U. Foam Blocks.

Issue 2: Cenvat credit balance and ownership change implications:
Regarding the Cenvat credit balance of Rs. 4,37,697.36, the issue revolved around the change in ownership of the factory and its impact on utilizing the credit. Rule 8 of the Cenvat Credit Rules, 2002 was analyzed to determine the applicability of transferring the Cenvat credit in cases of ownership change. The tribunal concluded that since the ownership of the factory remained with the appellant-company despite changes in shareholders, the provisions of Rule 8 did not apply. As a result, the demand for Cenvat credit of Rs. 4,37,697.36 was set aside.

In conclusion, the tribunal upheld the confirmation of the Cenvat credit demand of Rs. 84,201.85 related to the shortage of cenvated inputs. However, the demand for Cenvat credit of Rs. 4,37,697.36 was set aside due to the ownership structure of the factory. Consequently, the penalty under Section 11AC was also reduced to Rs. 84,201.85. The tribunal modified the impugned order accordingly, considering the reduced quantum of Cenvat credit demand.