2006 (11) TMI 190 - AT - Central Excise

Transfer of credit from one premises to another premises on closure / shifting of unit - the inputs in question had been duly accounted for to the satisfaction of the CCE, Bangalore and that it was upon such satisfaction that the Commissioner allowed transfer to the Modvat credit. The case of the Revenue that, for utilization of the transferred credit at Chengalpet, the inputs should have been physically received in that unit from Bangalore would lose ground. Credit is allowed

Summary

Issues:
Transfer of input-duty credit from one unit to another; Utilization of transferred credit at the new unit; Compliance with Rule 57F of the Central Excise Rules, 1944.

Analysis:
The appeal challenged the permission granted by the Commissioner (Appeals) for the transfer of input-duty credit from a unit in Bangalore to a new unit in Chengalpet. The amount allowed to be transferred was Rs. 37,23,609. The records showed that plant and machinery were shifted from Bangalore to Chengalpet, and unutilized input-duty credit of Rs. 37,23,609 was transferred. The Chengalpet unit utilized this credit for duty payment on final products, leading to a demand for credit reversal by the original authority. The Commissioner of Central Excise, Bangalore, had permitted this transfer in accordance with Rule 57F(7) of the Central Excise Rules, 1944. The department's objection was against the credit's utilization at Chengalpet, citing Rule 57F(21) which required physical transfer of stock of inputs to the new site. However, the Counsel for the respondents argued that the inputs were duly accounted for to the satisfaction of the Commissioner at Bangalore, fulfilling the rule's requirement. The Tribunal's previous decisions supported the respondents' case, and it was found that the credit transfer and utilization were valid.

The Tribunal considered previous decisions in similar cases, such as Aar Aay Products Pvt. Ltd. and Dr. Reddy's Laboratories Ltd., where input-duty credit transfer was allowed without physical stock transfer. The Counsel demonstrated that the inputs were accounted for to the satisfaction of the Commissioner, justifying the transfer to the Chengalpet unit's Modvat account. As a result, the department's objection to the credit utilization at Chengalpet based on Rule 57F(21) was dismissed. The impugned order permitting the credit transfer and utilization was sustained, and the appeal was dismissed.