2007 (11) TMI 297 - HC - Central Excise

Cenvat Credit - LDO used in Generator Set - Revenue contended that the Tribunal did not appreciate that LDO, which was supposed to be used only in respect of the generator belonging to the assessee, was not actually used by it. But the generator set was that of a different company. Therefore, there is a clear violation of the Cenvat credit and requests the Court to set aside the order - When two companies were amalgamated with the assessee company, all the assets and liabilities of the amalgamated company rests with the amalgamated company and the said generator was used by the assessee, no Court can hold that the assessee had availed credit of Cenvat wrongly - credit allowed.

Summary

Issues:
Challenge to order disallowing Cenvat credit on LDO usage for power generation through a generator based on ownership of the generator.

Analysis:
The case involved a dispute over the availing of Cenvat credit on the use of Light Diesel Oil (LDO) for power generation through a generator. The revenue challenged the order passed by the CESTAT disallowing the Cenvat credit. The revenue contended that the respondent had used the LDO in a generator that did not belong to them, thus violating the terms of the Cenvat credit rules. The respondent argued that after amalgamation with two other companies, all assets and liabilities, including the generator in question, belonged to them, and therefore, they were entitled to the Cenvat credit.

The Assessing Officer initially disallowed the Cenvat credit and imposed penalties and interest. The assessee appealed to the Commissioner of Income Tax, where the appeal was partially allowed. Unsatisfied with the partial relief, the assessee further appealed to the Income Tax Appellate Tribunal, which ruled in favor of the assessee, stating that there was no violation of Cenvat credit rules. The revenue then filed the present appeal before the High Court.

During the hearing, the revenue argued that the LDO was used in a generator belonging to a different company, thus breaching the Cenvat credit rules. However, upon reviewing the reply to the show cause notice, the High Court found that after the amalgamation of companies, the generator was indeed used by the assessee, and all assets and liabilities had transferred to them. Therefore, the High Court concluded that there was no violation of Cenvat credit rules and dismissed the appeal.

In the final judgment, the High Court upheld the decision of the Tribunal, emphasizing that the amalgamation of companies resulted in the transfer of assets and liabilities, including the generator in question, to the assessee. As a result, the High Court found no grounds for considering a violation of Cenvat credit rules in this case and dismissed the appeal filed by the revenue.