2016 (3) TMI 65 - AT - Central Excise

Transfer of Un-utilised cenvat credit balance - amalgamation - cenvat account in relation to input/input service, which were utilised for payment of duty on goods manufactured/cleared on or after 12.05.2005 - Held that - As find from the available records that the share holdings of M/s.Karamchand Appliances Pvt. Ltd. has been transferred to the appellant on 12.05.2005, but the Scheme of amalgamation was approved by the Hon ble Delhi High Court vide their order dated 09.10.2006, giving effect to the amalgamation date as 01.06.2005. Since the Hon ble High Court has specifically approved the effective date of transfer of ownership as 01.06.2005, the date when mere share holdings were transferred, should not be considered as the effective date for the purpose of transfer of cenvat credit. Since the effective date of the transfer is 01.06.2005, which has been specifically mentioned in the order dated 09.10.2006 of the Hon ble Delhi High Court, there is no scope of transfer of any cenvat credit balance lying in the cenvat credit account of M/s. M/s. Karamchand Appliances Pvt. Ltd. to the appellant prior to such date. Non-availability of cenvat balance in the account prior to 01.06.2005 shows that the same might have been utilised by M/s. Karamchand Appliances Pvt. Ltd., for which the cenvat demand cannot be fastened against the appellant. - Decided in favour of assessee

Summary

Issues:
Transfer of cenvat credit balance post amalgamation approval by High Court.

Analysis:
The case involved the transfer of cenvat credit balance of a company post its amalgamation with another entity. The appellant, a manufacturer of insecticides and electro thermic appliances, acquired 100% equity shares of another company, and the amalgamation was approved by the Delhi High Court with an effective date of transfer as 01.06.2005. The dispute arose when the Central Excise Department objected to the utilization of cenvat credit balance by the appellant, leading to show cause proceedings and subsequent adjudication. The Commissioner (Appeals) upheld the demand and imposed penalties, which led to the present appeal before the Tribunal.

The appellant argued that since the effective date of transfer was 01.06.2005 as per the High Court order, there was no scope for the transfer of cenvat credit balance prior to this date. The appellant contended that as the disputed credit had not been utilized, the recovery through the impugned proceedings was not in line with statutory provisions. The appellant relied on a Tribunal decision to support their stance that the effective date of transfer should be considered for cenvat credit transfer post-amalgamation.

The respondent, representing the Central Excise Department, reiterated the findings of the impugned order. Upon hearing both sides and examining the records, the Tribunal noted that the High Court had approved the effective date of transfer as 01.06.2005, despite the share transfer occurring earlier. The Tribunal emphasized that the scheme of amalgamation becomes effective only upon High Court approval. It was observed that there was no cenvat balance in the account prior to 01.06.2005, indicating its utilization by the previous entity, thereby absolving the appellant of the cenvat demand.

The Tribunal analyzed Rule 10 of the Cenvat Credit Rules, 2004, and found no explicit requirement for prior permission for cenvat credit transfer post-amalgamation. Consequently, the Tribunal concluded that the denial of cenvat credit by the lower authorities was not legally sustainable. Therefore, the impugned order was set aside, and the appeal was allowed in favor of the appellant.