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PJ/Case Laws/2012-13/1430

Cenvat Credit is admissible on shifting to new factory when the inputs and capital goods are also transferred.

Case:-  COMMR. OF C. EX., BANGALORE-III V/S TATA AUTO COMPONENTS SYSTEMS LTD.

 
 

Citation:- 2013 (29) S.T.R. 105 (Kar.)

 

Brief Facts: -The present appeal has been filed by the Revenue challenging the order passed by the Tribunal [2010 (20) E.L.T. 546 (Tri.-Bang.)], which has upheld the order of the Appellate Authority holding that the assessee is entitled to the benefit of unutilized credit, even though the inputs and capital goods were shifted to the new premises. The assessee M/s. Tata Auto Components Systems Ltd. is engaged in manufacture of excisable goods. Their unit is situated at No. 18/I A3, Nayanahalli, Mysore Road, Bangalore. They shifted the manufacturing activities to the new plant located at plot No. 28A, Bidadi Industrial Area, Bangalore. They obtained new Central Excise Registration Certificate. The assessee transferred the balance amount of Cenvat Input Credit of Rs. 2,86,552/- with Rs. 5,730/- towards education cess. Cenvat capital goods credit and input Service tax credit and education cess were lying unutilized in their books of account at Nayandahalli to Bidadi Industrial Area. A show cause notice came to be issued on 12-9-2006 calling upon the assessee by the Revenue to show cause as to why the Cenvat input credit should not be disallowed in terms of provision of Rule 10(3) of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944 with interest and penalty should not be levied. In reply, the assessee informed that they have informed the department vide letter dated 28-12-2005 regarding shifting of their manufacturing activity from their old unit to their new unit situated at Bidadi Industrial Area. They also informed that the inputs, semi finished, capital goods will be transferred under Rule 3(5) of the Cenvat Credit Rules, 2004 and under Rule 10 of Cenvat Credit Rules, 2004. They further informed that all statutory records had been transferred to their new unit and surrendered their old Registration Certificate and also informed that they had Cenvat balance of Rs. 2,86,552/- and Education Cess balance of Rs. 5,730/-. They pointed out that the amount due in various heads. However, the Assessing Authority opined that if unutilized balance in Cenvat credit sought to be transferred to new premises is permitted, it will give double benefit to assessee. Therefore, it was held that the assessee is not entitled to the said benefit. Aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Appeals. The Commissioner of Appeals on re-examination of the entire material on record categorically held that it is not the case of the department that inputs and capital goods were not shifted to new premises. In order-in-original, it is clearly admitted that the removal of inputs and capital goods to the new premises by following the proper procedure laid down under the [Cenvat Credit] Rules, 2004 has been done. It is also not the case of department that on removal of inputs and capital goods as such, the assessee has not made/debited appropriate duty. For the unutilized balance in credit account, on such removal of inputs and capital goods to the new premises on payment of duty, the assessee is rightly eligible for the transfer of the balance to the new premises. For such transfers, no specific permission is needed from the department. Therefore, he set aside the order passed by the Assessing Authority and granted the benefit. Hence, the Revenue challenged that order before the Tribunal, which has upheld the said order. Therefore, against the said order of the Tribunal, the revenue filed present appeal to the High court.

 

Reasoning of Judgment: - The Hon’ble High Court held that a perusal of the Rule 10 of Cenvat Credit Rules, 2004 makes it clear that if manufacturer of the final products shifts his factory to another site, the manufacturer shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred factory. The said transfer is subject to the condition stipulated in Rule 10(3) of the Rules, which provides that such transfer is permitted only if the stock of inputs as such or in process, or the capital goods is also transferred along with the factory or business premises to the new site, on which credit has been availed of are duly accounted for to the satisfaction of the Deputy Commissioner of Central Excise or as the case may be, the Assistant Commissioner of Central Excise. Therefore once the aforesaid condition is satisfied, the assessee is entitled to the benefit of Cenvat credit at the transfer site. In the light of the factual findings recorded in the proceedings by the Authorities that the credit has been availed of duly accounted to the satisfaction of the Authority, there is no case of double benefit as sought to be made out by the Assessing Authority. The Commissioner as well as the Tribunal are justified in setting aside the order and restoring the benefit to the assessee. Thus, the substantial question of law is answered in favour of the assessee.

 
 

Decision: - The appeal was dismissed.

Comment:-The analogy drawn from this case is that no credit cannot be denied when the assessee has followed proper procedure and satisfied all the conditions for transfer of inputs and capital goods to the new factory in case of shifting of its factory.

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