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2018 (2) TMI 896 - AT - Central ExciseCENVAT credit - demerger of appellant Company wherein CENVAT credit were lying unutilised - case of Revenue is that the invoice is in the name of other party and on which respondent has availed CENVAT credit therefore they are not entitled to avail CENVAT credit - Held that - Identical issue came up before Tribunal in the case of Commissioner of Central Excise v. Samruddhi Cement Ltd. 2013 (8) TMI 877 - CESTAT MUMBAI , where it was held that If the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory with the specific provision for transfer of liabilities of such factory, then, the transferor will be allowed to transfer the Cenvat credit lying unutilized to the transferee company - on demerger of appellant s Company, the respondent is entitled to avail CENVAT credit. Another ground taken by Revenue is that the respondent has not taken prior permission from the department for availment of CENVAT credit - Held that - in the show-cause notice it is mentioned that on 23.07.2010 itself the respondent has intimated to the department for demerger and availment of CENVAT credit. Moreover as per Rule 10 of Cenvat Credit Rules, 2004, there is no such requirement to obtain prior permission for demerger of the Company - CENVAT credit rightly availed. Appeal dismissed - decided against Revenue.
Issues:
- Entitlement to CENVAT credit on account of demerger - Requirement of prior permission for availing CENVAT credit Entitlement to CENVAT credit on account of demerger: The case revolved around the entitlement of the respondent to avail CENVAT credit following the demerger of their company. The Revenue contended that since the invoices were in the name of another party, the respondent was not eligible for the credit. However, it was argued that post-demerger, the respondent took over the factory and utilized the unutilized CENVAT credit under Rule 10 of the Cenvat Credit Rules, 2004. The Tribunal referred to Rule 10(1) of the Rules, which allows the transfer of unutilized CENVAT credit in cases of change in ownership or transfer of the factory. Citing precedents, the Tribunal held that the respondent was rightfully entitled to the transfer of CENVAT credit due to the change in ownership and the assumption of liabilities by the respondent. The Tribunal found no fault in the respondent's actions and upheld their entitlement to the CENVAT credit. Requirement of prior permission for availing CENVAT credit: Another issue raised by the Revenue was the lack of prior permission obtained by the respondent for availing the CENVAT credit post-demerger. The Tribunal noted that the respondent had intimated the department about the demerger and the intention to avail the credit on the same day. Referring to Rule 10 of the Cenvat Credit Rules, 2004, the Tribunal clarified that there was no explicit requirement to seek prior permission for demerger scenarios. Citing a previous case, the Tribunal established that prior permission was not necessary for demergers. Consequently, the Tribunal found that the respondent had correctly availed the CENVAT credit and upheld the impugned order. The appeal by the Revenue was dismissed, and the cross objection by the respondent was disposed of accordingly. In conclusion, the judgment by the Appellate Tribunal CESTAT MUMBAI addressed the issues of entitlement to CENVAT credit following a demerger and the necessity of prior permission for availing such credit. The Tribunal ruled in favor of the respondent, allowing them to avail the CENVAT credit post-demerger based on the provisions of Rule 10 of the Cenvat Credit Rules, 2004. Additionally, the Tribunal clarified that prior permission was not a prerequisite for availing CENVAT credit in cases of demerger, citing relevant precedents. The impugned order was upheld, dismissing the Revenue's appeal and disposing of the respondent's cross objection.
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