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2022 (2) TMI 790 - AT - Central ExciseCENVAT Credit - transfer of unutilized credit, on shifting of factory - factory is closed down at Bangalore and appellant confined the manufacturing activity to Puducherry unit, there is no merger or transfer of units - Rule 10 of CENVAT Credit Rules, 2004 - HELD THAT - Rule 10 of CEVAT Credit Rules, 2004 provides for transfer of unutilized CENVAT credit in the case of sale, merger, amalgamation, transfer of unit etc. In the present case, the appellant had closed the factory at Bangalore and transferred the inputs lying in stock to their unit at Puducherry. They then requested for transfer of the unutilized credit availed on inputs lying as balance in their unit at Bangalore. The request for transfer of CENVAT credit has been denied mainly on two grounds. (i) The closing down of the factory at Bangalore and the shifting of inputs lying in stock to the Puducherry unit cannot be considered as shifting of a factory. (ii) That the appellant has not shifted any capital goods and only inputs were shifted - Rule 10(1) will not apply. Transfer of unutilized credit also denied on the ground that appellants have shifted on inputs and not shifted the capital goods - HELD THAT - In the case of Ispat Industries (supra) it was held that it is not necessary that the inputs and capital goods have to be transferred. Rule 10(3) uses the expression inputs or capital goods . The appellant in the present case has transferred the inputs into the Puducherry unit. Thus, as per Rule 10(3), they are entitled for transfer of the unutilized credit. The disallowance of transfer of unutilized credit cannot be justified - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Transfer of unutilized CENVAT credit upon closure of a factory. 2. Applicability of Rule 10(1) of CENVAT Credit Rules, 2004. 3. Requirement of transferring capital goods along with inputs for CENVAT credit transfer. Issue-wise Detailed Analysis: 1. Transfer of unutilized CENVAT credit upon closure of a factory: The appellants, holding Central Excise registration for manufacturing multiplexers, closed their Bangalore unit and sought to transfer the unutilized CENVAT credit to their Puducherry unit. The Assistant Commissioner denied this request, stating that Rule 10(3) of CENVAT Credit Rules, 2004, applies only in cases of sale, merger, amalgamation, lease, or transfer of factory. Despite this, the appellants availed the credit suo moto and reflected it in their monthly returns, leading to a Show Cause Notice and subsequent confirmation of demand, interest, and penalty by the original authority. The appellants argued that the inputs were transferred to the Puducherry unit and relied on the Madras High Court's decision in CCE Vs. Featherlite Products Pvt. Ltd., which interpreted "shifts" in Rule 10(1) to include relocation of a unit. 2. Applicability of Rule 10(1) of CENVAT Credit Rules, 2004: Rule 10(1) allows transfer of unutilized CENVAT credit when a factory is shifted to another site or transferred due to change in ownership, sale, merger, amalgamation, lease, or transfer to a joint venture. The Tribunal referenced the Madras High Court's interpretation in Featherlite Products Pvt. Ltd., which held that "shifts" includes relocating a unit, enabling the transfer of unutilized CENVAT credit. The Tribunal concluded that Rule 10(1) applies in this case, as the appellant's situation fell within the scope of "shifting" the factory. 3. Requirement of transferring capital goods along with inputs for CENVAT credit transfer: The department denied the transfer of unutilized credit on the grounds that only inputs, not capital goods, were shifted. However, the Tribunal referred to the case of Ispat Industries Ltd. Vs. CCE, Raigad, which clarified that Rule 10(3) uses the expression "inputs or capital goods," not "inputs and capital goods." Therefore, transferring inputs alone suffices for the transfer of unutilized credit. The Tribunal found that the appellants had transferred the inputs to the Puducherry unit and were thus entitled to the credit transfer under Rule 10(3). Conclusion: The Tribunal, applying the provisions of Rule 10 and following the principles laid down in the cited decisions, held that the disallowance of the transfer of unutilized credit was unjustified. The impugned order was set aside, and the appeal was allowed with consequential relief. Pronouncement: The judgment was pronounced in open court on 03.2.2022.
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