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PJ/Case Law/2014-15/2234

Whether credit admissible on merger can be availed without intimation to the department?
Case:- OM GLASS WORKS PVT. LTD. v/s COMMISSIONER OF CENTRAL EXCISE, KANPUR

Citation:- 2012(279) E.L.T. 313 (Tri. – Del.)

Brief facts:-The facts of the case are that during the course of scrutiny of records by the audit team of Central Excise, it was observed that the appellant has taken cenvat credit in their RG 23A Part II on merger of M/s Pankaj Glass Works for which no proper documents were produced. Therefore, a show cause notice was issued for contravention of Rule 9 of Cenvat Credit Rules, 2004 read with Rule 11 of the Central Excise Rules, 2002. The show cause notice was adjudicated wherein the Cenvat credit was denied. Therefore, the demand was confirmed against the appellant along with interest and an equal amount of penalty. The lower appellate authority confirmed the adjudication order. Being aggrieved from the said order, the appellant is before Tribunal.


Appellant’s contentions:-It is contended on behalf of the appellant that the appellant has not violated any provision or any rule. Moreover, on merger, they have taken credit and after taking credit, they have intimated to the department regarding the said merger and availment of credit on the finished goods, work in process or inputs lying in the factory of M/s. Pankaj Glass Works. Therefore, impugned order is to be set aside. In support of his contention, he has also relied upon the Tribunal’s decision in the case of Commissioner of Central Excise, Pune-II v. Dow Agro Sciences India(P) Ltd.reported in 2010 (261) E.L.T. 225 (Tri. – Mumbai).      

Respondent’s contentions:-The ld. SDR appearing on behalf of the revenue, submitted that the appellants have violated the Rules. Therefore, the credit has been denied by the lower authorities. Moreover, as per Board’s Circular no. 1/93- CX.8 dated 5-1-1993, the appellant has to move an application before merger of unit with the another unit, which they have failed to do so. She also submitted that the appellants have violated Rule 9 and Rule 10 of the Cenvat Credit Rules, 2004. Therefore, the credit is not available to them.

Reasoning of judgment:- After considering the submissions and going through the relevant provisions of law, Rule 10 of the Cenvat Credit Rules, 2004 is the appropriate Rule which deals with the merger of unit with the another unit and Rule10(3) of the Cenvat Credit Rules, 2004, is reproduced below:
“Rule10(3): The transfer of the cenvat credit under sub- rules (1) and (2) shall be allowed 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 or ownership and the inputs, or capital goods, 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.”
As per the said Rule, there is no such requirement to take prior permission to transfer the credit on merger of one unit with the other unit. The only requirement is that the credit taken by the unit is to be verified upto the satisfaction of the concerned officers whether the assessee has correctly taken the credit or not. In the case of Dow Agro Sciences India(P) Ltd.(supra), the Tribunal has taken the same view wherein it has been held that no prior permission is required at the time of merger of one unit to another unit. Therefore, the appellants have correctly taken the credit subject to verification by the concerned officers and there is no violation of any rule by the appellants. Therefore, the impugned order is set aside and the appeal is allowed with consequential relief, if any.


Decision:- Appeal was allowed.

Comment:- The analogy of the case is that the Cenvat credit cannot been denied on the ground that the appellant has not intimated to the department prior to the merger in respect of the unit of M/s. Pankaj Glass Works with the appellant. There is no contravention of Rule 9 and Rule 10 because there is no provision of any intimation. The only thing to be noted is that the credit availed should be verified as proper
.   
Prepared by: Monika Tak
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