Tranfer of Cenvat Credit - permissibility of

PJ/Case Laws/2011-12/1382

Case: YEE KAY TECHNOCRAT (P) LTD. Versus COMMISSIONER OF C. EX., DELHI-IV

Citation: 2011 (271) E.L.T. 565 (Tri. - Del.)

Issue:- Shifting of factory to place were goods exempted from payment of duty (Uttarakhand) – Transfer of capital Goods – whether transfer of cenvat credit to such factory manufacturing exempted goods available?

Brief Facts:- Appellant had a factory in Faridabad till May 2007. In May 2007 they shifted their factory from Ghaziabad (it should be Faridabad) to Roorkee-Haridwar (Uttrakhand). All excisable goods manufactured in the new factory were exempted from payment of Excise duty.

In the process of shifting their factory, appellant had transferred capital goods on which Cenvat Credit was taken. They did not clear the capital goods under provisions of Rule (5) of Cenvat Credit Rules, 2004 by reversing applicable Cenvat credit; The Appellants have been contesting that they are entitled to transfer the capital goods from their factory at Faridabad to their factory at Roorkee under provisions of Rule 10(3) of Cenvat Credit Rules, 2004.

A Show Cause Notice was issued demanding of amount taken as cenvat credit as envisaged in Rule 3(5). The demand was confirmed along with interest and penalty under Section 11AC equal to the amount was imposed.

In appeal, the Commissioner (Appeals) upheld the demand and levy of interest thereon. The penalty under Section 11AC was set aside on the ground that the Appellant had transferred the capital goods, under intimation to the department and, therefore, intention to evade payment of duty cannot be alleged.

Aggrieved by the order-in-appeal, the appellant has filed appeal before the Tribunal.

Appellant’s Contention:- Appellant argues that their case falls squarely within Rule 10 (3) of Cenvat Credit Rules. Appellant were not selling the goods and the removal is from his factory at Faridabad to factory at Roorkee due to shifting of his factory and such situation is dealt with under Rule 10 (3) of Cenvat Credit Rules. Appellant rely on the following case laws in support of their arguments: -

- Sun pack v. CCE, Pondicherry [2008 (223) E.L.T. 95]
- Pooja Forge Ltd. v. CCE, Faridabad [2006 (196) E.L.T. 18 (T)]

Respondent’s Contention:- Revenue pointed out that Rule 10 (3) is not a provision enabling removal of capital goods. The main provision under Rule 10 is in sub-rule (1) which deals, among other situations, with transfer of credit lying unutilisecl in one factory to another factory of the same manufacturer. The instant case there was no credit lying unutilised. Further if at all any credit was lying unutilised the Appellant could not have transferred the credit to the new factory because all products manufactured in the new factory were fully exempted from Excise duty and, therefore, there was no question of transferring any credit on inputs or capital goods to the new factory. Rule 10(3) is a condition to be satisfied for transferring credit under Rule 10(1). Since credit could not have been transferred under Rule 10(1) and since there was no such transfer there was no question of allowing transfer of capital goods under this Rule 10(3). She argues that this is a case where capital goods have been removed from the factory at Faridabad and squarely covered by Rule 3(5) of Cenvat Credit Rules.

Reasoning of Judgment:- The Tribunal perused the provisions enumerated in Rule 10 of CCR, 2004 which are regarding the ‘Transfer of credit’. It was observed that it can be clearly seen from Rule 10 that the main enabling provision under this Rule is in sub-rule (1) which talks of transfer of credit. In this case, no transfer of credit was possible at all because the factory at Roorkee was not operating under Cenvat Scheme. That being the case provisions of Rule 10 (3) cannot be applied in this case. This Rule cannot be read as a provision enabling removal of capital goods from one factory of a manufacturer to another factory of the manufacturer. Therefore the correct rule applicable was Rule 3(5) as argued by the respondent.

The Tribunal also noted that the case laws relied upon by the appellants did not deald with the situation where machines were transferred to another factory manufacturing only exempted products and therefore, they are not applicable.

Decision:- Appeal rejected.

Comment:- This is interesting case where the goods are shifted to a factory which was not operating under cenvat credit scheme. Hence the Tribunal has rightly held that the cenvat credit cannot be passed on to such factory.

Comments

PJ/Case Laws/2011-12/1382

Post a Comment

Query