2016 (9) TMI 195 - AT - Central Excise

Transfer of unutilized credit - shifting of factory - Whether unutilized CENVAT credit lying in appellant s account prior to its shifting from Hosur to Bangalore shall entitle it to avail the same consequent upon such shifting - held that - the dispute arises only due to interpretational error under Rule 10(1) of CENVAT Credit Rules, 2004. It is well settled that law is to be interpreted in a manner to make that workable without creating any absurdity or ambiguity. Therefore a shifted unit if dealt discriminately under Rule 10(1) of CENVAT credit Rules, 2004, use of the word shifts in the beginning part of the said sub-rule shall be otios. Therefore, for reduction of litigation, learned CDR may take up the matter with the Government for appropriate legislative measure in sub-rule (1) of Rule 10 of CENVAT Credit Rules, 2004 to achieve the legislative mandate of shifting of a factory for any internal, external or statutory reasons. - Decided in favour of appellant

Summary

Issues:
Interpretation of Rule 10(1) of the CENVAT Credit Rules, 2004 regarding the entitlement of a shifted factory to unutilized CENVAT credit.

Analysis:
The appellant sought clarification on whether unutilized CENVAT credit from its account prior to shifting from one location to another can be availed post shifting. The Revenue contended that Rule 10 does not allow a shifting unit that closes its business to claim such credit, limiting credit carry forward to cases of amalgamation or merger.

The appellant argued that Rule 10(1) does not prohibit a shifted factory from availing unutilized credit, citing the absence of any restriction in the law. They emphasized a plain interpretation of the rule in light of relevant judicial precedents, asserting their entitlement to the credit post shifting.

Upon hearing both sides and examining the records, it was observed that the dispute arose due to an interpretational error under Rule 10(1) of the CENVAT Credit Rules, 2004. The rule allows for the transfer of unutilized credit to a factory that shifts locations, similar to cases of sale, merger, amalgamation, or lease. However, Revenue denied this benefit to shifted factories, citing the absence of the term "shifted" in the rule.

The Tribunal noted that the absence of the term "shifted" in the rule may be an oversight, and the word "shifts" in the rule's initial part implies an intent to include shifted factories for credit transfer. It was emphasized that laws should be interpreted to avoid absurdities or ambiguities, and discriminating against shifted units under Rule 10(1) would render certain terms redundant.

In light of the discussions, the Tribunal allowed the appeal, highlighting the need for legislative clarity to address the issue and reduce future litigation. It was suggested that the matter be brought to the Government's attention for appropriate legislative measures to align with the legislative intent regarding factory shifting under Rule 10(1) of the CENVAT Credit Rules, 2004.