2014 (3) TMI 87 - AT - Central Excise

Denial of CENVAT Credit - Transfer of unutilized cenvat credit alongwith transfer of liability - Change of ownership - appellant filed an application for transfer of credit lying in their CENVAT credit account attributable to inputs and capital goods, unutilized by them, to Exide Industries Ltd. - Request was denied - Non-compliance of provisions of Rule 57S(5) - Held that - From the plain reading of the Rule 57S(5), the condition of the transfer liability is applicable to change in site of the factory resulting from sale, merger, amalgamation or transfer to a joint venture. Admittedly, in this case, the factory has not been shifted to anywhere but only the ownership has been changed. Therefore, the clause of transfer liability is not applicable to the facts of this case. With regards to the denial of credit for non-compliance of provisions of Rule 57S(5), the appellant has produced a letter on record for requesting of transfer of the ownership of the factory along with the details of inputs and capital goods lying unutilized in their account is on transfer of the factory to Exide on 04.05.1998. The said document has not been appreciated by the lower authorities at all. When there is evidence on record, therefore the observation by the authorities that they have not produced any documents, is not sustainable - amount is required to be paid by the appellant and in this regard the appellant has written to the concerned authorities for adjustment of the said amount from the CENVAT credit lying unutilized. Therefore, I hold that the CENVAT credit lying unutilized is required to be allowed to transfer of inputs and capital goods to Exide after deducting the outstanding amount payable by the appellant - The amount payable by the appellant is to be adjusted first before allowing the said unutilized CENVAT credit on account of inputs and capital goods - Decided in favour of assessee by way of remand.

Summary

Issues:
Transfer of CENVAT credit on sale of unit to Exide Industries Ltd.
Interpretation of Rule 57F(20) and Rule 57S(5) of the Central Excise Rules, 1944.

Analysis:
The appellant appealed against the denial of CENVAT credit transfer on the sale of their unit to Exide Industries Ltd. The appellant argued that Rule 57F(20) and Rule 57S(5) allow for the transfer of credit on inputs to the buyer of the unit regardless of the transfer of liabilities towards Central Excise payments. The appellant cited legal precedents to support their claim. On the contrary, the respondent contended that the buyer has no liability for dues prior to the transfer, hence the credit cannot be transferred. The respondent also claimed that the appellant failed to provide documentary evidence as per Rule 57S(5).

Upon reviewing the submissions and records, it was observed that Rule 57F(20) permits credit transfer in cases of change of ownership or site resulting from sale, merger, etc. However, in this instance, only ownership changed, not the site of the factory. Therefore, the clause of transfer liability does not apply to the transfer of ownership alone. The judgment referenced legal precedent to clarify the distinction between change of ownership and change of site.

Regarding the denial of credit for non-compliance with Rule 57S(5), the appellant submitted a letter requesting ownership transfer along with details of unutilized inputs and capital goods. The lower authorities did not acknowledge this document, despite its presence on record. The judgment highlighted the importance of considering evidence on record before making decisions.

Additionally, the adjudication order mentioned a demand against the appellant, which the appellant sought to adjust from the unutilized CENVAT credit. The judgment directed that the outstanding amount payable by the appellant must be deducted before allowing the transfer of unutilized CENVAT credit on inputs and capital goods to Exide. The judgment concluded by remanding the case with specific terms for disposal.