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TMI Blog2019 (11) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessee M/s.IBM India Pvt.Ltd (IBMI) were manufacturing computers in their factory at Pondicherry. They availed cenvat credit of duty paid on inputs meant for use in the manufacture of these computers. IBMI was amalgamated with IBM Global Service India Pvt. Ltd. (IGSI) as per the scheme of amalgamation approved by order dt. 25.09.2004 of the Hon'ble Karnataka High Court with effective date of 05.01.2005 and transfer date of 01.04.2002. As per the scheme, all liabilities, debts, obligations and duties of IBMI stood transferred to IGSI with effective from the transfer date. Subsequently, IGSI have assigned, transferred, conveyed and sold certain assets to M/s.Lenovo (India) Pvt. Ltd. including manufacturing operations carried out from the said factory. 4. The Central Government issued an unconditional exemption notification No.23/2004-CE (as amended) exempting the computers manufactured by the appellant from payment of excise duty, w.e.f. 01.09.2004. On this date, the appellant had credit balance in their cenvat account. The SCN No.9/2005 dt. 04.07.2005 was issued to the appellant alleging that the availment of credit attributable to the inputs lying in stock as such or containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted by Notification No.10/2007-CE (NT) dt.1.3.2007 (which mandates that if the final product of assessee become exempt absolutely, the manufacturer or producer shall be required to pay an amount equivalent to cenvat credit, if any, taken by him in respect of the inputs received for use in the manufacture of final products and is lying in stock or in process or is contained in the final product lying in stock) will be applicable to the period prior to date of this notification (1.3.2007). 8. The second question is whether they are entitled to cenvat credit taken by the predecessor unit under Rule 10 CCR 2004 or such transfer is invalid in view of Rule 10 (3) of CCR 2004. 9. Elaborating first issue, Ld. counsel would submit that assessee is entitled to take cenvat credit if the final product is dutiable and not otherwise. Consequently, if the product becomes exempted unconditionally from duty assessee will not be entitled to take credit from that date. As far as credit that has already been taken, which is attributable to the inputs lying in stock or work in progress or the final products lying in stock (in respect of which, evidently no duty will be paid because of the exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported. (4) A provider of output service shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for providing the said service and is lying in stock or is contained in the taxable service pending to be provided, when he opts for exemption from payment of whole of the service tax leviable on such taxable service under a notification issued under section 93 of the Finance Act, 1994 (32 of 1994) and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export or for payment of service tax on any other output service, whether provided in India or exported." He would submit that prior to 1.3.2007, this rule had only sub rules (1) & (2) which provide for reversal of cenvat credit by any manufacturer who opts for exemption from whole of duty based on notification w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red part of the factory or business but the entire business and they operate from the same premises. It is not in dispute that all assets and liabilities have been transferred to the new entity. There is nothing on record to show that some of the inputs or capital goods have been diverted or sold outside. In fact, there is no such allegation at all. Under these circumstances, he would urge that they are squarely covered by provisions of Rule 10 (2) of CCR 2004 and are not covered by mischief of Rule 10 (3) of CCR 2004. 12. On the first question of reversal of CENVAT credit under Rule 11 (3), he relies on the case law of TAFE Ltd. Vs CCE Madurai-II - 2015 (320) ELT 357 (Mad.) affirmed by the Hon'ble Supreme Court reported in 2015 (324) ELT A86 (SC). The relevant portion of the judgment of the Hon'ble High Court of Madras in this case is contained in paras 17 & 18 which are reproduced below : "17. The introduction of Rule 11(3) of the Cenvat Credit Rules, 2004, by Notification No. 10/2007-C.E. (N.T.), dated 1-3-2007 and the Tax Research Unit Circular in D.O.F. No. 334/1/2007-TRU, dated 28-2-2007 clarifying that it will come into effect immediately, makes it clear that the positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is not entitled to disputed cenvat credit. 16. Countering this argument Ld. Counsel for the appellant submits that the case of Albert David (supra) has been reckoned by the Hon'ble High Court of Madras in the case of TAFE Ltd. (supra) while ruling that no cenvat credit under Rule 11 (3) needs to be reversed. This decision of the Hon'ble High Court of Madras has also been upheld by the Hon'ble Apex Court. 17. On the question of transfer of credit to the new entity Ld. D.R submits that sub-Rule (3) of Rule 10 is very categorical that the transfer of credit to the new entity is allowed only if the inputs as such or in process or the capital goods are also transferred along with factory or business and accounted for to the satisfaction of the Dy. Commissioner or Asst. Commissioner of Central Excise and the appellant has failed to show such transfer Therefore, appellant is not entitled to the cenvat credit of the disputed amounts. 18. We have considered the arguments on both sides and perused the records. 19. As far as the first question of reversal of cenvat credit availed on inputs lying unutilized in the cenvat credit account or contained in the inputs lying in stock or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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