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2017 (12) TMI 955 - HC - Central ExciseTransfer of unutilized CENVAT credit - interpretation of statute - transfer of factory - whether Sub-Rule 1 of Rule 8 requires transfer of the entire factory to another site or it is applicable even to a transfer of a part of the activity undertaken in the factory? - Held that - the letter dated 18th May 2002 makes it very clear that only a part of the activity of manufacture of final product of grey and processed fabric has been transferred to the unit at Dhamni. Thus, only a part of manufacturing activity has been transferred from Dadar unit to Dhamni unit and the yarn manufactured at Damni is again brought back to Dadar for the purposes of manufacturing of grey and processed fabrics. On plain reading of Sub-Rule 1 of Rule 8, it is apparent that it contemplates shifting the entire factory of the assessee. Rule 8(1) will not apply if only a part of the manufacturing activity is shifted to another site. In the present case, out of three units at Dadar which were used for manufacture of final product of grey and processed fabric, only one unit has been shifted and not entire factory - SubRule 1 of Rule 8 of the CENVAT Rules will not apply to the facts of the case. SubRule 6 of Rule 57F talks of shifting of the plant or factory to another site - this rule also not applicable in the present case. Appeal dismissed - decided against appellant.
Issues:
1. Interpretation of Rule 8 of CENVAT Rules regarding transfer of unutilized credit under Central Excise Act. 2. Whether Rule 8 applies to the shifting of the entire factory or a part of it. 3. Determining the meaning of "factory" in the context of Rule 8 of CENVAT Rules. Issue 1: Interpretation of Rule 8 of CENVAT Rules regarding transfer of unutilized credit under Central Excise Act: The appellant-assessee appealed under section 35G of the Central Excise Act, 1944 against the order of the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai. The case revolved around the transfer of unutilized credit of additional duty on textile and textile articles from one unit to another. The appellant contended that the transfer was permissible under Rule 8 of the CENVAT Rules. Issue 2: Whether Rule 8 applies to the shifting of the entire factory or a part of it: The key contention was whether Rule 8 of the CENVAT Rules required the transfer of the entire factory or if it applied to the transfer of a part of the manufacturing activity. The appellant argued that the transfer of a part of the factory's activity was covered under Rule 8, citing the specific case of shifting the spinning unit from one location to another. Issue 3: Determining the meaning of "factory" in the context of Rule 8 of CENVAT Rules: The interpretation of the term "factory" under Rule 8 of the CENVAT Rules was crucial in determining the applicability of the rule to the situation at hand. The court examined the definition of factory and the specific provisions of Rule 8 to ascertain whether the transfer of a part of the manufacturing activity constituted a valid application of the rule. The court analyzed the contentions of both parties, focusing on the language of Rule 8 of the CENVAT Rules. Sub Rule 1 of Rule 8 allows for the transfer of unutilized credit when a manufacturer shifts the entire factory to another site. The court emphasized that the rule does not apply if only a part of the manufacturing activity is transferred. In this case, the appellant had shifted only a portion of the manufacturing activity, indicating that Rule 8 did not cover the situation. The court examined the appellant's submissions and the specific details of the case, including the letters submitted regarding the shifting of the spinning unit. It was evident from the correspondence that only a part of the manufacturing activity had been relocated, with the final products being transferred back to the original unit for further processing and sale. This partial transfer did not align with the requirements of Rule 8 for the transfer of unutilized credit. Ultimately, the court dismissed the appeal, ruling that Rule 8 of the CENVAT Rules did not apply to the partial transfer of manufacturing activity in this case. The judgment highlighted the importance of the specific language and requirements of the rule in determining its applicability to different scenarios, emphasizing the need for a complete transfer of the factory for the rule to take effect.
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