2013 (6) TMI 654 - HC - Central Excise

Modvat / Cenvat Credit - Transfer of credit - amalgamation - Whether the Appellate Tribunal is right in allowing the accumulated Modvat Credit on Molasses, after amalgamation, for the payment of duty on Sugar without transferring the corresponding input as required under erstwhile Rule 57F(12) of CER 44? - Held that - Proviso to Rule 57F of the Central Excise Rules provides that the credit of duty allowed in respect of any input be utilised towards the payment of duty on any other final product, irrespective of whether such inputs have been used actually in the manufacture of such final product. The only condition is that the inputs should have been received and used in the factory of production on or after 1st March, 1997. Hence, we have no hesitation in accepting the case of the assessee that there is no transfer of units as understood in the legal parlance and the transfer itself being after 1999, they are entitled to have the advantage of the proviso to the said Rule. In the circumstances, we agree with the assessee s contention and we have no hesitation in affirming the order of the Tribunal. Even though the Tribunal has not reasoned its order in so many words, yet, it followed the decision of the Delhi Tribunal on a similarly positioned assessee. We agree with the decision of the Tribunal. Consequently, we reject the appeal preferred by the Revenue. - Decided against the revenue.

Summary

Issues:
1. Interpretation of Rule 57F(12) of Central Excise Rules regarding accumulated Modvat Credit transfer.
2. Applicability of accumulated credit from one unit to another within the same management.

Analysis:
1. The case involved a manufacturer of sugar seeking to use accumulated credit from the distillery unit for duty on sugar. The Revenue alleged wrongful transfer of credit and issued a show cause notice. The assessee contended that as both units were under the same management, there was no transfer of assets, just a request for a single registration certificate. The Assistant Commissioner initially dropped proceedings, but the Commissioner reversed, holding that unutilised credit could not be used for sugar duty. The Tribunal, citing similar cases, allowed the appeal, emphasizing the interconnectedness of the units. The Court agreed with the assessee, citing Rule 57F proviso allowing credit utilization for any final product, affirming the Tribunal's decision.

2. The Revenue argued that unutilised credit could not be transferred between units as per Rule 57F(12). However, the Court noted that both units were managed by the same entity, with no actual transfer of assets. The Court emphasized that the proviso to Rule 57F allowed credit utilization for any final product, regardless of input use. The Court upheld the Tribunal's decision, rejecting the Revenue's appeal and confirming the availability of unutilised credit for duty payment on sugar. The Court dismissed the Civil Miscellaneous Appeal and the associated application, with no costs awarded.