2007 (7) TMI 53 - AT - Central Excise

Cenvat/Modvat - Revenue contended that appellant is not entitle for transfer of unutilised Cenvat credit to other unit on the ground that there is not accompanied by physical transfer of inputs as such or in process - Held that revenue contention was not correct and allowed transfer

Summary

Issues:
- Denial of permission for transfer of unutilized CENVAT credit to Gujarat Unit
- Interpretation of Rule 10 of the CENVAT Credit Rules, 2004
- Requirement of physical transfer of inputs for credit transfer
- Claim for interest on CENVAT credit amount

Analysis:
1. The appeal pertains to the denial of permission to transfer unutilized CENVAT credit from the Pondicherry unit to the Gujarat unit. The lower authorities refused permission despite the plant and machinery being transferred with official approval. The dispute revolves around the interpretation of Rule 10 of the CENVAT Credit Rules, 2004, which allows credit transfer in specific circumstances.

2. Rule 10 of the CENVAT Credit Rules, 2004, permits the transfer of unutilized credit when a factory is shifted to a new site, subject to certain conditions. The rule mandates the transfer of stock of inputs or capital goods along with the factory. In this case, the appellants shifted their plant and machinery to Gujarat but did not physically transfer inputs as there were no stock or in-process inputs at the time. The Revenue argued for physical transfer, contrary to a precedent where such transfer was not deemed necessary.

3. The Tribunal noted that the Revenue's insistence on physical transfer of inputs for credit transfer lacks merit. Relying on a previous decision, it held that such transfer is permissible even without physical movement of inputs. The lower authorities erred in not allowing the credit transfer based on this flawed interpretation of the rule.

4. The appellant also sought interest on the CENVAT credit amount, citing legal precedent. However, as the claim was not raised before the lower authorities or in the appeal memorandum, the Tribunal could not entertain this claim for interest. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants.

In conclusion, the Tribunal ruled in favor of the appellants, emphasizing that the physical transfer of inputs was not a prerequisite for transferring unutilized CENVAT credit to the Gujarat unit. The decision highlights the importance of interpreting tax rules accurately and ensuring fair treatment for taxpayers seeking legitimate credit transfers.