2021 (12) TMI 960 - AT - Service Tax

CENVAT Credit - capital goods - case of department is that since the appellant has transferred the credit from Mumbai to Surat the same is not eligible to them on the ground that they have not complied with the provision of Rule 10(2) of Cenvat Credit Rules, 2004 - HELD THAT - The appellant initially requested for amendment for the registration as except the change of address there was no change in the constitution of the company or nature of service however, the department has rejected their request therefore, they had no option except to obtain a fresh registration which they had obtained at Surat. As regard availment of credit of 50%, since the 50% of credit was due in the year 2014-15 they have availed this credit in the said year at Surat as their business activity was being carried out at Surat. Therefore, this cannot be treated as transfer of credit from Mumbai to Surat. From the reading of the aforesaid Rule 10(2) it is absolutely clear that the Rule 10(2) applies only when a provider of output service shifts or transfers his business on account of change in ownership or on account of sale, merger, amalgamation lease or transfer of the business to joint venture with specific provision for transfer of liabilities of such business. In the present case even though the appellant have taken registration in Surat but there is no transfer of business on account of change in ownership the registration taken in Surat is by the appellant themselves. Therefore, Rule 10(2) clearly does not apply in the facts of the present case. Moreover if we read rule 10(1), a manufacture of final product if shifts his factory to another site he has to apply for transfer of the credit but there is no similar provision for service provider in Rule 10(2) that merely because a service provider transferred his business to a different location is operated under his own name, the rule 10(2) does not apply. As regard the allegation that appellant instead of showing the credit shown opening balance, there are nothing wrong in that because whether it is shown as opening balance or shown as credit the same amount of credit will be available to the appellant - the appellant's taking credit of 50% on capital goods at Surat is absolutely legal and correct and the same cannot be denied. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Transfer of Cenvat credit from Mumbai to Surat without compliance of Rule 10(2) of Cenvat Credit Rules, 2004.

Analysis:
The appellant initially sought an amendment for their service tax registration due to shifting their office from Mumbai to Surat, but the request was rejected, leading them to obtain a fresh registration at Surat. The dispute arose regarding the transfer of 50% credit on capital goods from Mumbai to Surat without complying with Rule 10(2) of Cenvat Credit Rules, 2004. The department contended that the credit transfer was not valid as per the rule, resulting in denial of the credit by the original authority and the commissioner (Appeals).

Appellant's Argument:
The appellant argued that there was no transfer of credit, as they had availed 50% credit in Mumbai and took the remaining 50% as fresh credit in Surat. They emphasized that Rule 10(2) applies to cases of business ownership transfer due to merger or amalgamation, which was not the situation in their case. They cited a relevant judgment to support their position.

Revenue's Argument:
On the other hand, the revenue asserted that the credit transfer from Mumbai to Surat required compliance with Rule 10(2) and since the appellant failed to do so, they were not entitled to the credit.

Judgment:
After considering both arguments and examining the records, the tribunal found that the appellant's action did not constitute a transfer of business ownership, as they had merely changed their office location without any change in business constitution. The tribunal clarified that Rule 10(2) applies only to specific instances of business transfer due to ownership changes, which did not apply in this case. Additionally, the tribunal noted that the appellant's method of showing credit as an opening balance instead of directly as credit did not affect their eligibility for the credit. Consequently, the tribunal set aside the impugned order, allowing the appeal and disposing of the matter.