2023 (2) TMI 229 - AT - Central Excise

Denial of CENVAT Credit - denial on the ground that credit was transferred two months before the period prescribed under Rule 10A of Cenvat Credit Rules - HELD THAT - The transferor assessee is required to transfer the credit at the end of the quarter. In the present case, for the quarter ending December 2013, instead of transferring credit on 31.12.2013, it was transferred on 31.10.2013. Similarly for the quarter ending September 2014, instead of transfer of credit on 30.09.2014 it was transferred on 31.07.2014. I find that there is no dispute that the credit which was transferred was lying accumulated in the Cenvat account of transferor unit. The transfer of credit from one unit to another unit of the same assessee company in terms of Rule 10A is only a procedural requirement and it is not a case of any fresh payment of duty. The credit which is transferred is in respect of duty which was already paid. Therefore, by transfer of credit there is no Revenue implication. If at all there is lapse, it is on the part of the transferor unit against which the audit had already raised the issue and on payment of interest the issue was settled and no further action was taken against the transferor unit. For this reason also Cenvat credit should not have been denied to the appellant. There are no reason that in the facts and circumstances of the present case why the credit can be denied - appeal allowed.

Summary

Issues: Denial of Cenvat credit due to early transfer of credit between units.

The judgment by the Appellate Tribunal CESTAT Ahmedabad dealt with the denial of Cenvat credit to the appellant by the Revenue because the credit from another unit was transferred to the appellant's unit before the due date, as required under Rule 10A of the Cenvat Credit Rules, 2004. The appellant argued that although there was a procedural lapse in transferring the credit before the due date, they had paid interest for the period between when the credit was due and when it was taken. The appellant contended that the denial of Cenvat credit was based on an audit conducted at the transferor unit, and since the issue was resolved with the payment of interest, the credit should not have been denied. The Revenue, represented by the Superintendent, reiterated the findings of the impugned order denying the Cenvat credit.

Upon considering the submissions from both sides and examining the record, the Tribunal noted that the denial of Cenvat credit was based on the transfer of credit from one unit to another of the same assessee company not being done at the end of the quarter as required by Rule 10A. The credit was transferred earlier than the prescribed dates for two quarters. However, it was observed that the credit transferred was already paid duty, and the early transfer did not have any revenue implications. The Tribunal highlighted that the appellant had paid interest for the early transfer and availed the credit accordingly. The Tribunal emphasized that the denial of credit solely due to early transfer was not justified.

Furthermore, the Tribunal pointed out that any lapse in the transfer of credit was on the part of the transferor unit, which had resolved the issue with the audit and payment of interest without further action. Therefore, the Tribunal concluded that the denial of Cenvat credit to the appellant was unwarranted. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief. The judgment was pronounced in open court on 06.02.2023.