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2023 (3) TMI 495 - AT - Central ExciseTransfer of CENVAT Credit to lessee unit - Department denied to transfer the CENVAT Credit lying in the account balance of the appellant-company stating that there is no express stipulation in the agreement to transfer the liabilities of the appellant company - request for transfer of CENVAT Credit can be denied on technical grounds or not - HELD THAT - The Department has referred to the agreement between the parties to deny the permission to transfer the CENVAT Credit, with the reason that there is no express stipulation for transfer of all liabilities of the appellant-company to the lessee unit. On perusal of the agreement, it is found that there is a clear intention between the parties to transfer the ownership of the machinery belonging to the appellant unit to the lessee unit. Such transfer is done along with transfer of raw materials, components, capital goods etc. which indicates that the lessee unit is put into the shoes of a manufacturer in the place of the appellant-company. The agreement has to be construed as to what is the intention of the parties who have entered into agreement and not by word to word analysis. On going through the entire agreement, it is clear that there is consensus ad idem to transfer the ownership along with assets and liabilities to the lessee unit. Thus, the rejection of the request to transfer CENVAT Credit balance as per Rule 10 of CCR 2004 is without any legal or factual basis. The Department is directed to issue permission to the appellant unit to transfer credit to the lessee unit - appeal allowed.
Issues:
1. Transfer of unutilized cenvat credit to a newly transferred unit denied by the department. 2. Interpretation of Rule 10 of Cenvat Credit Rules, 2004 regarding the transfer of cenvat credit in case of change in ownership. 3. Dispute over the permission to transfer the cenvat credit balance to the lessee unit. Issue 1: Transfer of unutilized cenvat credit denied by the department The appellants, engaged in manufacturing textile machinery, sought permission to transfer unutilized cenvat credit to a newly transferred unit, M/s.GKD ITR, Tooling Central Unit-II. The department denied permission, leading to an appeal before the Tribunal. Issue 2: Interpretation of Rule 10 of Cenvat Credit Rules, 2004 The appellant relied on Rule 10 of Cenvat Credit Rules, 2004, which allows the transfer of cenvat credit in case of factory transfer due to change in ownership. The rule mandates the transfer of credit if inputs or capital goods are transferred along with the factory or business premises. Issue 3: Dispute over permission to transfer cenvat credit to the lessee unit The department denied transfer based on the absence of an express stipulation in the agreement for transferring all liabilities of the appellant-company to the lessee unit. However, the Tribunal found that the agreement clearly indicated the intention to transfer ownership, assets, and liabilities to the lessee unit. The Tribunal analyzed Rule 10 of Cenvat Credit Rules, 2004, emphasizing the requirement of transferring inputs or capital goods along with the factory or business premises for cenvat credit transfer. The Tribunal noted that the agreement between the parties demonstrated a clear intention to transfer ownership, assets, and liabilities to the lessee unit. The Tribunal held that the rejection of the request to transfer the cenvat credit balance was unfounded, as the lessee unit effectively took over the manufacturing activities of the appellant-company. In conclusion, the Tribunal directed the Department to permit the transfer of cenvat credit to the lessee unit, as per Rule 10 of CCR 2004. The appeal was allowed with consequential relief, if any, in accordance with the law.
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