2019 (2) TMI 401 - AT - Central Excise

Transfer of credit - Rule 10 of CENVAT Credit Rules - merging of units - availment of credit on capital goods - Held that - Undisputed facts are ESCL and ESIAD have merged together and formed merged ESCL and are given one registration number which would indicate that the unit was functioning out of one premises; that both the units unmerged ESCL and ESID, were operating/manufacturing. The merger of the both units was accepted by the authorities in the form of issuing a new registration certificate, there was no outward movement of inputs or capital goods from the premises of unmerged ESCL and ESID, as also from merged ESCL, would mean that all the inputs and the capital goods on which CENVAT credit was availed by the unmerged units were available in the premises. Rule 10 do not mandate for any separate written permission from jurisdictional authorities. The language of Rule 10(1) specifically states that manufacturer shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transfer, sold, merged, leased or amalgamated factory. The Provisions of Rule 10(3) is also complied in this case as the stock of inputs as such or in process or capital goods are also to be transferred along with the factory premises, in the name of merged ESCL and there is due accounting in merged ESCL. Ineligible CENVAT credit availed on capital goods - 100% credit availed in subsequent year - Held that - The appellant had not availed any CENVAT credit in the year of receipt of the capital goods and has availed CENVAT 100% in the subsequently after the factory was commissioned. The appellant has correctly availed the CENVAT credit on capital goods. There is no doubt as to the fact that the capital goods were received in the factory premises in ESIAD and they were installed and CENVAT credit was availed subsequent to the production activity - the impugned order to the extent it denies CENVAT credit on capital goods is also not in consonance with the law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Transfer of CENVAT credit in the case of merger of two units
- Availment of CENVAT credit on capital goods

Transfer of CENVAT credit in the case of merger of two units:
The case involved a merger of two units, resulting in the formation of a single unit. The merged unit had applied for a new registration certificate but did not seek permission for the transfer of unutilized CENVAT credit balance as required by Rule 10(3) of the CENVAT Credit Rules, 2004. The adjudicating authority relied on Rule 10, which allows the transfer of CENVAT credit unutilized in accounts to a merged factory subject to certain conditions. The rules do not explicitly mandate separate written permission from jurisdictional authorities for such transfers. The Tribunal found that the provisions of Rule 10 were complied with as the stock of inputs and capital goods were transferred to the merged unit and accounted for satisfactorily. The Tribunal held that the denial of CENVAT credit to the merged unit solely on the grounds of lack of permission from authorities was incorrect. The decision was based on precedents such as Solaris Bio-Chemicals Ltd., Hewlett Packard (I) Sales (P) Ltd., and Kiran Pondy Chems Ltd.

Availment of CENVAT credit on capital goods:
Regarding the demand for ineligible CENVAT credit availed on capital goods, the Tribunal noted that the appellant had received capital goods over a specific period and availed 100% credit on these goods when the unit started functioning fully. The CENVAT Credit Rules mandate bifurcating the credit, with 50% in the year of receipt and 50% in the subsequent financial year. In this case, the appellant had not availed any credit on the capital goods during the year of receipt but had availed 100% credit later. The Tribunal found that the appellant correctly availed the CENVAT credit on capital goods as they were received, installed, and credit was taken after production activities commenced. The impugned order denying CENVAT credit on capital goods was deemed unsustainable and set aside.

In conclusion, the Tribunal held that the impugned order was unsustainable, and therefore set it aside, allowing the appeal in favor of the appellant.