2012 (12) TMI 707 - AT - Central Excise

Transfer of unutilized Cenvat credit denial as the appellant had not shifted his factory from Sirsa to a new site - Held that - The Commissioner (Appeals) has interpreted the word another site as a new site where there was no production unit in existence. This approach of the Commissioner (Appeals) is incorrect as the word another site used in Rule 10(1) of Cenvat Credit Rules means the site other than the factory which is being shifted. No Inputs in the factory of the appellant at Sirsa at the time of shifting - Held that - This approach of the Commissioner (Appeals) is also unacceptable for the reason that Rule 10(3) of the Cenvat Credit Rules provides that the transfer of cenvat credit under Rule 10(1) shall be allowed if the stock of inputs as such or in process, or the capital goods is also transferred along with factory. Admittedly, as it is evident from the letter dated 26.10.2005 of the jurisdictional Excise Office, Hisar when the Excise team visited the factory of the appellant on receipt of intimation regarding the shifting, they did not find any Inputs as such or under process in the stock. If there was no inputs in the stock, there was no occasion for transferring the inputs to the new factory. Admittedly, the appellant has transferred the capital goods to another site at Meerut. Therefore,the condition of Rule 10(3) of Cenvat Credit Rules for transfer of cenvat credit is fulfilled. No basis for conclusion that the appellant has only shifted the capital goods but not the entire factory as there is no evidence on record to show that the appellant has shifted the factory only on paper and the production is still going on at Dabwali Road, Sirsa - no denial of transfer of cenvat credit warranted - in favour of assessee.

Summary

Issues:
1. Interpretation of Rule 10(1) and (3) of Cenvat Credit Rules, 2004 for transfer of unutilized cenvat credit from one manufacturing unit to another.

Analysis:
The case involved M/s Fabrico (India) Pvt Ltd., engaged in manufacturing base plate, steel tabular poles. The appellant had two manufacturing units, one at Meerut and the other at Dabwali Road, Sirsa. In 2005, the appellant decided to close the Sirsa unit and merge it with the Meerut unit. The appellant sought to transfer unutilized cenvat credit of Rs.41,20,514 from the Sirsa unit to the Meerut unit as per Rule 10(1) of Cenvat Credit Rules, 2004. The Department disputed this transfer, leading to a show cause notice demanding the amount and imposing a penalty. The Additional Commissioner disallowed the transfer, which was upheld by the Commissioner (Appeals).

The key contention was whether the transfer of unutilized cenvat credit from the closed Sirsa unit to the existing Meerut unit was permissible under Rule 10(1) and (3) of Cenvat Credit Rules, 2004. The Commissioner (Appeals) held that since the factory was not shifted to a new site and only capital goods were transferred, the transfer was not allowed. The appellant argued that the closure of the Sirsa unit and the shifting of capital goods to Meerut constituted shifting the factory to another site, as envisaged under Rule 10(1). The Tribunal analyzed the provisions of Rule 10(1) and (3) and noted that the Commissioner (Appeals) misinterpreted the term 'another site,' which referred to a site other than the factory being shifted. The Tribunal also found that the condition of Rule 10(3) regarding the transfer of inputs or capital goods was met, as the appellant had shifted capital goods to Meerut. There was no evidence to suggest that the factory was not genuinely shifted, leading the Tribunal to conclude that the denial of the transfer was unjustified.

Ultimately, the Tribunal allowed the appeal, setting aside the order disallowing the transfer of cenvat credit and confirming the duty demand with interest and penalty. The Tribunal held that the appellant was entitled to transfer the unutilized cenvat credit to the Meerut unit, considering the closure of the Sirsa unit and the transfer of capital goods, in compliance with Rule 10(1) and (3) of Cenvat Credit Rules, 2004.