2014 (5) TMI 454 - AT - Central Excise

CENVAT Credit - Transfer of unutilized CENVAT Credit from 1 unit to another - assessee has stopped the manufacturing activity at Unit No. 1 - Held that - The fact of availment of CENVAT credit by Unit No. 2 on 01.08.2000 was in the knowledge of the department and the show-cause notice was issued on 03.09.2001 which is barred by limitation. Further, there is no bar of transfer of CENVAT credit lying unutilized on closure of the unit, although there is no stock of inputs as per the decision in the case of AAR AAY Products Pvt. Ltd. (2002 (7) TMI 204 - CEGAT, NEW DELHI). Therefore, I do not find any infirmity in the impugned order - Decided against Revenue.

Summary

Issues:
1. Appeal against order setting aside adjudication due to limitation on show-cause notice issuance for transfer of CENVAT credit.
2. Transfer of unutilized credit from one unit to another.
3. Bar on transfer of credit in absence of stock of inputs or finished goods.

Analysis:
1. The appeal was filed by the Revenue against the order of the learned Commissioner (Appeals) setting aside the adjudication order due to the show-cause notice being considered barred by limitation. The case involved the transfer of CENVAT credit from Unit No. 1 to Unit No. 2 by the respondent, a manufacturer of travel goods. The show-cause notice was issued alleging improper transfer of credit and proposing a penalty. The Revenue contended that the notice was issued in time, while the respondent argued that it was time-barred as the fact of credit transfer was known to the department earlier.

2. The respondent had two manufacturing units, with the unutilized credit from Unit No. 1 being transferred to Unit No. 2. The show-cause notice questioned this transfer, claiming the absence of finished goods or inputs in Unit No. 1 at the time of transfer. The respondent argued that the transfer was valid despite the lack of stock in Unit No. 1, citing a precedent where such transfers were allowed even without existing inventory. The Tribunal considered these arguments and the timing of the show-cause notice issuance in relation to the department's knowledge of the credit transfer.

3. The Tribunal found that the show-cause notice issued on 03.09.2001 was indeed barred by limitation as the department was aware of the credit transfer since 01.08.2000. Additionally, it was established that the absence of stock in Unit No. 1 did not prohibit the transfer of unutilized credit to Unit No. 2, aligning with the precedent cited by the respondent. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the decision to set aside the adjudication order based on the limitation issue and the validity of the credit transfer despite the lack of inventory in Unit No. 1.