2007 (9) TMI 135 - AT - Central Excise

On taking lease of a factory, unutilized credit on the lesser factory can be utilized by lessee (assessee) Rule 10 of Cenvat Credit Rules not lay down any condition for seeking permission from the authorities to utilize the unutilized credit of lesser company

Summary

Issues:
1. Eligibility of assessee to avail Cenvat credit on the lessor factory.
2. Requirement of permission from the Department for credit transfer.
3. Interpretation of Rule 10 of Cenvat Credit Rules regarding transfer of credit.

Analysis:
1. The appeal arose from the Commissioner (Appeals) accepting the assessee's claim to avail Cenvat credit on the lessor factory upon leasing the factory. The Commissioner observed that the lessor unit had instructed the raw material supplier to deliver to the job worker, who then sent final products to the lessor unit after duty payment. The lessor unit provided the invoices to the job worker for credit, which the assessee later utilized. The Commissioner deemed this a technical lapse and upheld the Order-in-Original passed by the Deputy Commissioner, leading to the dismissal of the Revenue's appeal.

2. The Revenue contended that the assessee did not seek permission from the Department for the credit transfer and argued that the lessor factory had no unutilized credit. In response, the learned Counsel clarified that credit was available at the time of transfer and refuted the Revenue's claims. The Tribunal noted that Rule 10 of the Cenvat Credit Rules does not mandate permission for credit transfer. Rule 10 allows the transfer of unutilized credit to a transferred, sold, merged, leased, or amalgamated factory without requiring prior authorization. The Tribunal affirmed the Commissioner's decision that the credit was available upon leasing and upheld the previous orders in favor of the assessee.

3. The Tribunal emphasized that both the Commissioner and Deputy Commissioner correctly applied Rule 10 of the Cenvat Credit Rules, which permits the utilization of unutilized credit in transferred factories. The Tribunal found no deviation from the law in the decisions made by the authorities. Therefore, the Tribunal rejected the Revenue's appeal, concluding that there was no merit in challenging the eligibility of the assessee for Cenvat credit on the lessor factory. The Cross-objections were also disposed of in favor of the assessee.