2012 (9) TMI 530 - AT - Central Excise

Cenvat credit - Cenvat credit has been denied on the ground that the appellant has not intimated to the department prior to the merger in respect of the unit of M/s. Pankaj Glass Works with the appellant - Held that - No prior permission is required at the time of merger of one unit to another unit - Therefore, the appellants have correctly taken the credit subject to verification by the concerned officers and there is no violation of any rule by the appellants in favor of assessee

Summary

Issues:
1. Denial of Cenvat credit on merger of units due to lack of intimation to the department.
2. Alleged violation of Rule 9 and Rule 10 of the Cenvat Credit Rules, 2004.
3. Interpretation of Rule 10(3) regarding the transfer of CENVAT credit on merger of units.

Analysis:

Issue 1: The appellant filed an appeal against the denial of Cenvat credit on the merger of units, citing lack of intimation to the department as the reason for the denial. The Audit Team of Central Excise observed discrepancies in the documentation related to the merger with M/s. Pankaj Glass Works, leading to the issuance of a show-cause notice. The lower appellate authority upheld the denial of credit, resulting in the appellant challenging the order.

Issue 2: The appellant argued that they did not violate any provision or rule and had intimated the department about the merger post taking credit. The appellant relied on a Tribunal decision to support their contention. On the contrary, the Revenue contended that the appellants had indeed violated the rules, specifically Rule 9 and Rule 10 of the Cenvat Credit Rules, 2004. The Revenue highlighted a circular requiring an application before unit merger, which the appellants failed to comply with.

Issue 3: The Tribunal analyzed Rule 10(3) of the Cenvat Credit Rules, 2004, which governs the transfer of CENVAT credit during the merger of units. The Rule stipulates that transfer of credit is permissible if inputs or capital goods are transferred along with the factory or business premises, subject to verification by the concerned officers. The Tribunal emphasized that no prior permission is necessary for credit transfer during unit mergers, as long as the credit transfer is verified by the authorities. Citing a precedent, the Tribunal ruled in favor of the appellants, stating that they correctly availed the credit without violating any rules.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, based on the interpretation of Rule 10(3) and the absence of a requirement for prior permission for credit transfer during unit mergers.