2017 (4) TMI 278 - AT - Central Excise

Transfer of credit from one unit to another - demand - extended period of limitation - whether the appellant is having manufacturing activity at Faridabad or not in the knowledge of the department therefore, the extended period of limitation is invokable? - Held that - the appellant itself has intimated in 2006 that they have shifted their manufacturing activity to Palwal and the same was received by the department that the appellant has shifted their manufacturing activity in 2006, itself. It is also fact on record by way of service tax returns filed by the appellant. They have availed cenvat credit on service tax paid by them, therefore, as all the facts in the knowledge of the department. The SCN was issued to the appellant by invoking extended period of limitation is not sustainable in the eyes of law. Accordingly, the impugned order is not sustainable. Further, the cenvat credit had reversed by the appellant voluntarily without any protest. In that circumstances, although the extended period of limitation is not invokable, the appellant is not entitled to claim refund of the same. The matter is remanded back to the adjudicating authority for verification purpose whether the cenvat credit transferred to Palwal Unit is correct or not? - appeal allowed by way of remand.

Summary

Issues:
1. Extended period of limitation for issuing show cause notice.
2. Correctness of transferring cenvat credit under Rule 10(3) of the Cenvat Credit Rules, 2004.
3. Verification of the transfer of credit to Palwal Unit.

Analysis:
1. The case involved an appeal against an order where the appellants were denied cenvat credit of service tax due to the transfer of manufacturing activities from one location to another. The show cause notice was issued invoking the extended period of limitation. The appellant contested this, arguing that the notice was not sustainable as the department was aware of the transfer since 2006. The Tribunal found in favor of the appellant, stating that the notice invoking the extended period of limitation was not valid as the department had knowledge of the manufacturing activity shift, as evidenced by service tax returns filed by the appellant.

2. The issue of transferring cenvat credit under Rule 10(3) of the Cenvat Credit Rules, 2004 was also raised. The appellant had transferred cenvat credit to their Palwal Unit without prior intimation to the department. The Tribunal held that the matter needed verification as per Rule 10(3) and remanded it back to the adjudicating authority for the same. The correctness of the transfer of credit had to be verified before a decision could be made.

3. Additionally, the Tribunal noted that the appellant had voluntarily reversed the cenvat credit without protest. Despite finding the extended period of limitation not applicable, the Tribunal ruled that the appellant was not entitled to claim a refund of the reversed credit. The appeals were disposed of with these terms, and the adjudicating authority was directed to verify the transfer of cenvat credit before passing an appropriate order.