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2014 (9) TMI 861 - AT - Central ExciseCENVAT Credit - Conversion of DTA into EOU - Held that - EOUs are entitled to avail Cenvat credit w.e.f. 6-9-2004 in view of the provisions in the Notification No. 18/2004-C.E. (N.T.), dated 6-9-2004. Therefore the issue involved is when the factory was converted from DTA to 100% EOU, credit could have been transferred or not. If the EOU is also entitled to avail Cenvat credit, obviously the entire amount available as credit in the books could have been transferred. This is in view of the fact that according to Rule 10 of CCR, even when there is change in ownership on account of sale, merger, amalgamation, lease or transfer of the factory with the specific provisions for transfer of liability, the Cenvat credit lying unutilized can be transferred. The credit could have been utilized by the DTA unit if it remained to be a DTA without any restriction for payment of duty. Just because the unit got converted to 100% EOU which also became eligible for the Cenvat credit from 6-9-2004 i.e. prior to conversion of the DTA unit to 100%, EOU, credit, in my opinion, cannot be limited to the stock of inputs lying with the assessee. appellant has made out a case in their favour - Decided in favour of assessee.
Issues:
1. Transfer of Cenvat credit balance from DTA to EOU. 2. Interpretation of Cenvat Credit Rules, 2004 regarding the extent of credit transfer. 3. Applicability of previous judicial decisions on similar issues. 4. Determination of admissibility of Cenvat credit in the case of conversion from DTA to EOU. Issue 1: Transfer of Cenvat credit balance from DTA to EOU The appellant, a public company manufacturing pharmaceutical products, converted its DTA unit into an EOU, retaining a Cenvat credit balance of Rs. 91,18,775. The audit noted that this credit was not tenable under Circular No. 77/99-Cus. Proceedings ensued, leading to the denial of Rs. 38,59,661 credit transfer to EOU, based on the input stock available at the time of conversion. Issue 2: Interpretation of Cenvat Credit Rules, 2004 regarding the extent of credit transfer The Counsel argued citing precedents that the entire credit should be transferable to EOU, while the AR contended that only the available input stock should be considered. The Commissioner allowed credit transfer based on available inputs, ignoring work in progress and finished goods due to lack of details provided by the appellant. Issue 3: Applicability of previous judicial decisions on similar issues The Tribunal analyzed the applicability of CCE v. Raveshia Colours Pvt. Ltd. and CCE v. Sandoz Pvt. Ltd. decisions cited by the Counsel, noting that the issue in this case was distinct. The Tribunal emphasized the need for correct credit utilization and admissibility at the time of initial credit claim. Issue 4: Determination of admissibility of Cenvat credit in the case of conversion from DTA to EOU The Tribunal examined Rule 10 of CCR, allowing credit transfer in ownership changes, and Rule 11's transitional provision for unutilized credit. It concluded that credit should not be limited to stock at conversion but based on correct initial claim admissibility. The Tribunal found no legal basis to support the Commissioner's view of credit lapse and ruled in favor of the appellant, allowing the appeal with consequential relief. This judgment clarifies the principles governing Cenvat credit transfer during the conversion of a DTA unit to an EOU, emphasizing the importance of correct credit claim admissibility and the absence of statutory provisions for credit limitation based on stock availability at conversion.
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