Is the unutilized cenvat credit available before surrender of registration transferable to the new unit?

PJ/Case Law/2018-2019/3467

Case:ROHIT SURFACTANTS PVT. LIMITED Versus COMMISSIONER OF C. EX., DELHI-I

Citation:2018 (13) G.S.T.L. 175 (Tri. - All.)

Issue: Is the unutilized cenvat credit available before surrender of registration transferable to the new unit?

Brief facts:The appellants is engaged in the manufacture of detergent cake and detergent powder in their factory located in Delhi, surrendered their licence on 18-12-2009, as they
shifted their manufacturing unit to Shahibabad. Vide their application dated 8-9-2010, they requested their jurisdictional Assistant Commissioner to allow them to transfer the accumulated unutilized CENVAT credit of Rs. 40,15,820/- to their Shahibabad unit.
In as much as at the time of surrender of the registration, the appellant was having a credit of Rs. 14,04,432/- only, the same was allowed by the authorities. The balance credit of Rs. 26,11,388/-, which was availed by the appellant after the surrender of their registration, was denied on the ground that they were not entitled to avail the same as they no longer remained an assessee under Rule 9 of the Central Excise Rules, 2002.
Proceedings were initiated against them by way of show cause notice dated 10-10-2010 resulting in disallowing the appellant request of transfer of the said amount. The original adjudicating authority, however, did not impose any penalty. The said order was upheld by the Commissioner

Appellant’s contention: The contention of the appellant was that their Delhi unit was entitled to avail the said credit of around Rs. 26.11 lakhs even prior to their registration and the CENVAT Credit Rules allow them to take the credit and to transfer the same to their new unit. For the above proposition, they also relied upon the decision of Gujarat High Court in the case of CCE v. Dashion Ltd. - 2016 (41) S.T.R. 884(Guj.) as also in the case of Bhansali Engg. Polymers Ltd. v. CCE, Bhopal - 2016 (42) S.T.R. 86(Tri.-Del.).

Respondent’s Contention and Reasoning of Judgment:After going through the impugned order and after appreciating the submissions made by both the sides, the Appellate Authority found that the short ground on which the appellant has been denied the transfer of the credit is that the same was availed by them after surrender of their registration. The Appellate Authority was of the view that if the said credit was available to the appellant prior to their registration, the fact of surrendering of licence should not be adopted and the appellant request to transfer the credit should not be denied on such hyper technical grounds. It is well settled law that substantive benefit should not be denied on the ground of procedural and technical violations, if an assessee is otherwise entitled to the same.
As such the question to be seen is as to whether the said credit was otherwise available to the assessee prior to their registration and belongs to the receipt of the goods or services, availed by the assessee prior to the surrender of their registration. In as much as the impugned orders have not verified the above fact, The Appellate Authority deems it fit to set aside the impugned order and remand the same for verification of the above issue. If the appellant was entitled to avail the credit before the surrender of their registration and the fact that the same has not been actually taken before the surrender, would not come in their entitlement to transfer the same to their new unit.

Decision: The appeal was allowed by the way of remand.

Comment: The kernel of the case is, the applicant is engaged in the business of manufacturing of detergent cake and detergent powder. The applicant surrendered his license as they shifted their manufacturing unit to Shahibabad. They requested their Jurisdictional Commissioner to allow them to transfer the accumulated unutilized CENVAT Credit to their new unit. The adjudicating authority denied this plea on the grounds that the applicant is no longer an assessee under Rule 9 of the Central Excise Rules, 2002.
However after hearing both sides the Appellate Authority came to the conclusion that credit was available to the appellant prior to their new registration, the fact of surrendering of license should not be adopted and the appellant’s request to transfer the credit should not be denied on such hyper technical grounds. Further, it is well settled law that substantive benefit should not be denied on the ground of procedural and technical violations, if an assessee is otherwise entitled to the same. Hence on the basis of above connotation the appeal was allowed in favor of the applicant.

Prepared by: Prateeksha Jain

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PJ/Case Law/2018-2019/3467

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