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2023 (6) TMI 237 - AT - Central ExciseTransfer of Credit - Merger of two units - transfer of CENVAT credit which was lying in Plant I, which was earlier an EOU unit to their merged DTA unit - Department alleged that as there is no transfer of capital goods / inputs as required under the sub-rule (3) of Rule 10 and the CENVAT credit lying unutilized in the accounts of the earlier EOU cannot be transferred to the merged DTA Unit - Rule 10 of CENVAT Credit Rules, 2004 - HELD THAT - There are nothing in Rule 10 which disallows transfer of CENVAT credit in the manner alleged by department. So also there is no dispute that the credit availed by the EOU which has been transferred is ineligible. The very same issue was considered by the Tribunal in the case of Technocraft Industries 2018 (12) TMI 8 - CESTAT MUMBAI where it was held that denial of carry forward of accumulated Cenvat credit to assessees debonding from the 100% Exported Oriented Unit scheme to continue operations without the privileges is not correct in law and is set aside. In the case of Sun Pharmaceuticals 2009 (5) TMI 849 - CESTAT CHENNAI , the Tribunal held that at the material time the CER or CCR did not contain any provision barring the 100% EOUs from availing cenvat credit or utilizing the same for payment of duty on excisable goods removed to the DTA or for payment of duty on goods exported under claim for rebate. Also there exists no bar for a DTA unit carrying over inputs and the cenvat credit balance in its accounts when it got converted into an EOU. Following the ratio laid down by the judgments above, which is squarely applicable to the facts of the case, it is held that the demand cannot sustain. The impugned order is set aside - appeal allowed.
Issues Involved:
1. Legality of transferring CENVAT credit from an EOU unit to a merged DTA unit. 2. Interpretation and application of Rule 10 of CENVAT Credit Rules, 2004. 3. Precedents regarding the transfer of CENVAT credit upon debonding of EOU units. Summary: Issue 1: Legality of transferring CENVAT credit from an EOU unit to a merged DTA unit: The appellant, engaged in manufacturing hydraulic cylinders, transferred CENVAT credit from their EOU unit to a merged DTA unit after the EOU converted into a DTA unit. The department contested this transfer, arguing it was not permissible under sub-rule (3) of Rule 10 of CENVAT Credit Rules, 2004, which requires the transfer of ownership of capital goods/inputs for credit transfer eligibility. The Tribunal found no provision in Rule 10 disallowing such credit transfer and noted the department did not dispute the eligibility of the credit initially availed by the EOU. Issue 2: Interpretation and application of Rule 10 of CENVAT Credit Rules, 2004: Rule 10 allows the transfer of unutilized CENVAT credit if the factory or business premises are transferred, sold, merged, leased, or amalgamated, provided the stock of inputs or capital goods is also transferred and duly accounted for. The Tribunal emphasized that the rule does not explicitly disallow the transfer of CENVAT credit in the manner alleged by the department. The Tribunal referenced the case of Technocraft Industries (India) Ltd., where it was held that denial of carry forward of accumulated CENVAT credit to debonding units is not correct in law. Issue 3: Precedents regarding the transfer of CENVAT credit upon debonding of EOU units: The Tribunal cited several precedents, including Sun Pharmaceuticals Industries Ltd. and Jubilant Life Sciences Ltd., which supported the appellant's position. In these cases, it was consistently held that CENVAT credit lying in balance as on the date of debonding of a 100% EOU and conversion to a DTA unit could be transferred and utilized by the DTA unit. The Tribunal followed judicial discipline and the ratio laid down by these judgments, concluding that the demand by the department could not sustain. Conclusion: The Tribunal set aside the impugned order and allowed the appeal with consequential relief, reinforcing that the transfer of CENVAT credit from an EOU to a merged DTA unit is permissible under the law.
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