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2005 (5) TMI 167 - AT - Central ExciseDuty liability - Modvat - Transfer of inputs - Removal of goods - whether the appellant has to pay/reverse the Cenvat credit in respect of capital goods and inputs lying as such and inputs (raw materials) contained in finished products lying as such and transferred to IRTL as on 1-4-2003 - HELD THAT - We find that the appellant prepared a scheme for transfer of spun yarn business to another company namely M/s. Indorama Textiles Ltd. (for short IRTL) and got approved by MP High Court. It is uncontested that the spurn yarn manufacture had been transferred to IRTL without any physical shifting of capital goods, finished products and inputs lying in the appellants factory. IRTL got separate registrations. The appellant deleted the portion of area and contents therein transferred to IRTL from the ground plan as was in the case of Jamna Auto Inds. 2000 (9) TMI 146 - CEGAT, NEW DELHI Provisions of Rule 57F(2) is similar to Rule 3(4) of Cenvat Credit Rules on inputs and capital goods and such a transfer in law, following the decisions submitted by appellant. The impugned order demanding duty u/s 11A of C.EX. Act as duty on the finished goods lying in stock on the day of transfer of spurn yarn business to IRTL is incorrect under Central Excise Act, 1944 even though the levy is on manufacture the recovery is differed to the point of removal settled by the Federal Court Supreme Court decisions. Removal means physical shifting of goods has been laid down 'place of removal' to be may be a factory or any other place or premises of production or manufacture of excisable goods. Therefore, in the present case by mere change in ownership possession 'Removal' of goods cannot be construed. There was no reason to order recovery of duty on excisable goods before the registration was altered there is no reason for such determination after alteration of registration as no shifting in physical term has occasioned IRTL has to and has discharged duty on removal/clearance from the premises. In view of the finding the appeal is required to be allowed after setting aside the order. Ordered accordingly.
Issues:
- Duty demand on finished goods due to change of ownership of factory premises - Reversal of Cenvat credit in respect of capital goods and inputs - Interpretation of Rule 3(4) of Cenvat Credit Rules - Applicability of Rule 8 of the Cenvat Credit Rules - Liability to pay duty on finished goods and inputs capital goods - Demand of duty on goods only at the time of removal - Correctness of demanding duty on finished goods under Section 11A of C.EX. Act Analysis: 1. The appeal addressed the duty demand of Rs. 75.91 lakhs on finished goods due to a change in factory ownership. The question was whether the appellant needed to reverse Cenvat credit for capital goods and inputs. The appellant transferred its spun yarn business to another company, IRTL, without physically removing goods, citing Rule 3(4) of Cenvat Credit Rules. The Tribunal noted the separate registration of IRTL and the non-removal of goods, following precedents like Metzeller Automotive Profiles India. 2. The appellant argued that Rule 8 of the Cenvat Credit Rules and past decisions exempted them from reversing credits. They contended that since the finished goods were not physically removed but sold to IRTL, no duty was payable until removal. Citing cases like BPL Electronics Ltd. v. CCE, they emphasized that duty liability arises only upon removal of goods. 3. The Tribunal found that the spun yarn business transfer to IRTL did not involve physical shifting of goods. IRTL obtained separate registrations, and the appellant updated plans to reflect the transfer. Relying on decisions like Whirlpool of India Ltd. v. CC, New Delhi, the Tribunal concluded that no credit reversal was warranted. 4. The impugned order demanded duty under Section 11A of the C.EX. Act on finished goods at the transfer date, which the Tribunal deemed incorrect. Referring to legal precedents like J. K. Spinning & Weaving Mills Ltd., the Tribunal emphasized that duty liability is linked to physical removal of goods, not ownership changes. As IRTL paid duty upon clearance, no duty was payable before removal. 5. Consequently, the Tribunal set aside the order, ruling in favor of the appellant. The judgment highlighted the distinction between ownership changes and physical removal concerning duty liability. The decision underscored the importance of actual removal for duty payment and rejected the demand for duty on finished goods before their physical transfer.
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