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2024 (11) TMI 1218 - AT - Central ExciseConversion of 100% EOU into DTA - denial of CENVAT Credit - non-registration of debonded EOU - denial of credit u/r 10 of CENVAT Credit Rules, 2004 - denial of transfer of PLA balance of debonded EOU to CENVAT credit of DTA. Denial of CENVAT credit of Rs. 10,77,05,805/- on allegation of non-registration of debonded EOU - HELD THAT - The appellant provided all possible disclosures in their application. Pursuant to this letter, the department issued amended central excise registration certificate on 11-03-2013. In this background, when the appellant made all disclosures in their application and amended central excise registration was issued, we do not find any merit in confirming the demand on allegation of non-registration - there are force in appellant s arguments that the department is taking contrary stand as at one hand it is denying credit on the ground that DTA excise registration does not bear address of debonded EOU but at the same time has accepted payment of central excise duty on the clearance made from the premises of EOU. When the appellant provided re-defined boundaries for amended registration in their application and basis the said application revised excise registration was issued, merely non mentioning of the specific plot number cannot lead to denial of credit - there are force in appellant s arguments that it is a settled law that registration of premises is not a pre-requisite for availing credit. It was held in the case of MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX 2011 (9) TMI 450 - KARNATAKA HIGH COURT that ' In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law.' Also, the appellant s submission that substantial benefit of credit cannot be denied for procedural lapse is a settled preposition of law as has been held by various decisions including the Bombay High Court decision in COMMISSIONER OF CENTRAL EXCISE, NAGPUR, VERSUS M/S. LARSEN TOUBRO LTD., THE CUSTOM EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, MUMBAI 2022 (1) TMI 665 - BOMBAY HIGH COURT - thus, the demand do not sustain. Denial of credit of Rs. 4,21,16,159/-, under Rule 10 of CENVAT Credit Rules, 2004 - HELD THAT - On a bare perusal of provision of Rule 10 of CCR it can be seen that the said provision can be invoked in specific circumstances like shifting of manufacturing unit at another site of transfer of factory due to change of ownership, sale, merger, amalgamation, lease or transfer of the factory to a joint venture. Herein, the appellant has merged adjacent debonded EOU into their DTA unit for which clearly provision of Rule 10 of CCR cannot be invoked and therefore, no demand can sustain under Rule 10 of CCR. The appellant converted its EOU unit into DTA and during the said conversion transferred the balance CENVAT credit of EOU into DTA. There are force in appellant s arguments that during conversion of unit from DTA to EOU or from EOU to DTA there is no bar on transfer of CENVAT credit. The issue at hand pertains to conversion of EOU to DTA, it is observed that there is no provisions under the law which bars debonded EOU unit to avail credit in its DTA unit post conversion - the demand of Rs. 4,21,16,159/-, cannot sustain. Denial of transfer of PLA balance of Rs. 7,89,895/- of debonded EOU to CENVAT credit of DTA - HELD THAT - The PLA is nothing, but appellant s own money lying in balance which can be utilized at a future event for payment of excise duty. Herein, transiting of credit into DTA unit, on merger of EOU into the said DTA, also serves the same purpose. Also, since the Leaned Commissioner admits that the appellant is entitled for refund of the same, transiting the credit in DTA unit has no revenue impact. As has been held in JAY SHREE TEA INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., KOLKATA 2005 (8) TMI 189 - CESTAT, KOLKATA pending utilization of the PLA amount towards excise duty, the department has no claim over such amount. As such, demand on this issue is not sustainable. Thus, no demand can sustain. Accordingly, the impugned order is set aside and the appeal allowed with consequential reliefs, if any.
Issues Involved:
1. Denial of CENVAT credit of Rs. 10,77,05,805/- due to non-registration of debonded EOU. 2. Denial of credit of Rs. 4,21,16,159/- under Rule 10 of CENVAT Credit Rules, 2004. 3. Denial of transfer of PLA balance of Rs. 7,89,895/- from debonded EOU to DTA. Issue-Wise Detailed Analysis: 1. Denial of CENVAT credit of Rs. 10,77,05,805/-: The appellant argued that after debonding their EOU unit, they sought to merge it with an adjacent DTA unit and accordingly amended the DTA registration to include the debonded EOU premises. Despite this, the department denied the CENVAT credit on the grounds of non-registration of the debonded EOU. The appellant contended that registration is not a prerequisite for claiming CENVAT credit and that the non-mention of a specific plot number in the amendment was a procedural lapse, not a substantive issue. The tribunal found merit in these arguments, noting that the appellant had made full disclosures in their application, and an amended registration was issued. The tribunal also referenced past judgments supporting the view that registration is not mandatory for availing credit and concluded that the demand for Rs. 10,77,05,805/- could not be sustained. 2. Denial of credit of Rs. 4,21,16,159/- under Rule 10 of CENVAT Credit Rules, 2004: The appellant argued that Rule 10 of the CENVAT Credit Rules, 2004, which pertains to the transfer of credit in cases of factory shifting or change of ownership, was incorrectly applied. The appellant maintained that their situation did not fall under the scenarios covered by Rule 10, as the factory remained at the same premises under the same management. The tribunal agreed, stating that Rule 10 could not be invoked as there was no transfer of the factory or change in ownership. The tribunal cited previous decisions that allowed the transfer of CENVAT credit during the conversion of units, supporting the appellant's case. Consequently, the demand for Rs. 4,21,16,159/- was found unsustainable. 3. Denial of transfer of PLA balance of Rs. 7,89,895/-: The appellant contended that the PLA balance was their own money, earmarked for excise duty payments, and could be carried forward without departmental permission upon the merger of the EOU into the DTA unit. The tribunal found this argument compelling, noting that the merger effectively made the EOU and DTA one entity, entitled to use the PLA balance. The tribunal referenced a judgment supporting the transfer of PLA balances upon mergers, emphasizing that the PLA is merely a deposit for future duty payments. The tribunal concluded that the demand regarding the PLA balance was not sustainable. Conclusion: The tribunal determined that none of the demands could be sustained. The denial of CENVAT credit, the application of Rule 10, and the refusal to transfer the PLA balance were all found to be without merit. The impugned order was set aside, and the appeal was allowed with consequential reliefs.
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