2023 (10) TMI 1086 - AT - Central Excise

Transfer of accumulated CENVAT Credit of the EOU Unit to the DTA Unit after exit of EOU status - HELD THAT - As per Rule 10 if a manufacturer shifts the factory to another site or the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory to a joint venture then the manufacturer is allowed to transfer the CENVAT credit lying un-utilised in its accounts to the Unit that is sold, merged, leased or amalgamated - In the present case, the Unit has become a DTA after exiting from EOU status. Under Central Excise law both these units are considered as separate entities. The accumulated credit cannot be denied to both the units and the department cannot recover such credit which belongs to the appellant. The issue stands covered by the decision in the case of TECUMSEH PRODUCTS INDIA P. LTD. VERSUS C.C.,C.E. S.T., HYDERABAD-IV 2015 (9) TMI 1487 - CESTAT BANGALORE where it was held that a successor DTA unit can get the transfer credit of the unutilized credit lying with its predecessor unit, which is an EOU in the present case. The demand cannot sustain and requires to be set aside. The impugned order is set aside - Appeal allowed.

Summary

Issues:
The issue involves the transfer of accumulated CENVAT credit from an Export Oriented Unit (EOU) to a Domestic Tariff Area (DTA) unit after the EOU's exit from EOU status.

Summary:
The appellants, manufacturers of pistons under CETH 87081090, held EOU status till 13/3/2012, then converted to a DTA unit. They applied for NOC to exit EOU status, carried forward unutilized CENVAT credit to the DTA unit, which the department disputed. The department argued that Rule 10 of CENVAT Credit Rules 2004 does not allow transfer without change of ownership. The appellant contended that as the same legal entity converted from EOU to DTA, the credit should be transferrable. The Tribunal, citing precedents, allowed the appeal, stating that the accumulated credit cannot be denied to both units as they were under the same ownership. The Tribunal held that the department cannot recover the credit belonging to the appellant.

In a separate judgment, the Tribunal further emphasized that the denial of carry forward of accumulated CENVAT credit to assessees debonding from the 100% Exported Oriented Unit scheme to continue operations without privileges is not correct in law. The Tribunal set aside the demand, allowing the appeal with consequential relief.

Overall, the Tribunal ruled in favor of the appellant, allowing the transfer of accumulated CENVAT credit from the EOU to the DTA unit after the EOU's exit from EOU status, based on the legal entity's continuity and ownership structure.