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2018 (11) TMI 166 - AT - Service TaxCENVAT Credit - It appeared that since UEPL who merged in parts with 3 companies including the appellants, the appellants would have been entitled to a part of the CENVAT credit available in the books of UEPL - Held that - The entire issue has been gone in great details by the First Appellate Authority in the impugned order. He has clearly recorded that the respondent herein is part of the demerger plan approved by Hon ble High Court. The appellant s legal right to credit of ₹ 20,55,937/- as successor to the related business of UEPL taken over by them cannot be denied on the ground of procedural infirmity of non-filing of application under Rule 10(3) of CCR 2004 and the credit taken, therefore, has to be held to be validly accrued and taken by the appellants. Appeal dismissed - decided against Revenue.
Issues:
- Recovery of irregularly taken CENVAT credit amounting to ?20,55,937 - Eligibility of the appellant to avail the CENVAT credit - Interpretation of the demerger order and its impact on the CENVAT credit transfer - Procedural compliance regarding the application for transfer of credit under Rule 10(3) of CCR 2004 - Validity of the credit taken by the appellant Analysis: 1. Recovery of Irregularly Taken CENVAT Credit: The Revenue filed an appeal against the Order-in-Appeal, seeking to recover the irregularly taken CENVAT credit of ?20,55,937 by the appellant. The original authority ordered the recovery under Rule 14 of CCR 2004 and Sections 73, 75, 77, and 78 of the Finance Act, 1994. The First Appellate Authority allowed the appellant's explanation regarding the eligibility to avail the credit. 2. Eligibility of Appellant for CENVAT Credit: The Departmental Representative argued that the appellant was not entitled to the credit beyond the actual amount of ?5,17,452 held by the predecessor company. However, the First Appellate Authority found in favor of the appellant, emphasizing the demerger plan approved by the High Court and the existence of the disputed credit in the accounts of the predecessor company. 3. Interpretation of Demerger Order and Credit Transfer: The Counsel for the respondent highlighted that the demerger order recognized the availability of ?20,55,937 CENVAT credit to the predecessor company. The First Appellate Authority's detailed examination concluded that the appellant, as the successor, had a legal right to the credit accrued from the predecessor's business. 4. Procedural Compliance and Validity of Credit Taken: The appellant's delayed action in taking the credit was scrutinized concerning Rule 4 of CCR 2004, which did not impose a time limit until 01.09.2014. Despite the procedural lapse of not filing an application under Rule 10(3) of CCR 2004, the First Appellate Authority upheld the validity of the credit based on the demerger context and due diligence followed. 5. Conclusion: The Tribunal concurred with the First Appellate Authority's findings, emphasizing the legality of the credit taken by the appellant as the successor to the predecessor company. The order rejecting the appeal was deemed correct and legally sound, requiring no interference. The decision was based on a thorough analysis of the demerger context, procedural aspects, and the entitlement of the appellant to the disputed CENVAT credit.
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