Whether there is any bar on transfer of unutilized credit of one unit to another unit of same concern although there is no stock of inputs or finished goods in the closed unit ?

PJ/Case Law/2014-15/2166

Case:-  CCE, NASIK Vs VIP INDUSTRIES LTD

Citation:- 2014-TIOL-720-CESTAT-MUM

Issue:- Whether there is any bar on transfer of unutilized credit of one unit to another unit of same concern although there is no stock of inputs or finished goods in the closed unit ?

Brief Facts:- Brief facts of the case are that the respondent was having two units at Jalgaon and is manufacturer of travel goods namely soft and moulded luggages. As the respondent has stopped the manufacturing activity at Unit No. 1, the unutilized credit lying in the CENVAT credit account of Unit No. 1 was transferred to Unit no. 2 on 01.08.2000 and some of the goods have also been transferred from Unit No. 1 to Unit No. 2. A show-cause notice was issued for denying the transfer of CENVAT credit to Unit No.2 on 03.09.2001 on the premise that there was no finished goods or inputs lying in Unit No. 1 at the time of its closure, and a penalty has also been proposed. The matter was adjudicated and the demands were confirmed. On appeal, the adjudication order was set aside. Aggrieved by the same, the revenue is in appeal before the Honbl’e CESTAT.

Appellant’s Contention:-  It is contended by the learned A.R. that the show-cause notice was issued in time and the respondent is not entitled to take the credit.

Respondent’s Contention:- On the other hand, the learned Advocate appearing on behalf of the respondent contended that the fact of availing of CENVAT credit of Unit No. 2 was brought to the notice of the department on 01.08.2000 and the show-cause notice came to be issued on 03.09.2001 which is barred by limitation. It was further contended in the light of the case of AAR AAY Products Pvt. Ltd. – 2003 (157) ELT 40 (Tri-Delhi). that there is no bar of transfer of un-utilized credit to Unit No. 2 despite of the fact that there is no stock of inputs or finished goods lying in Unit No. 1 at the time of transfer of unutilized credit.

Reasoning of Judgment:-   The fact of availment of CENVAT credit by Unit No. 2 on 01.08.2000 was in the knowledge of the department and the show-cause notice was issued on 03.09.2001 which is barred by limitation. Further, there is no bar on transfer of CENVAT credit lying unutilized on closure of the unit, despite of the fact that there is no stock of inputs lying as was held in the decision of AAR AAY Products Pvt. Ltd. (supra). Therefore, the appeal filed by the Revenue was dismissed.

Decision:- Revenue’s appeal dismissed

Comment:-   The conclusion drawn from the case is that there is no bar on transfer of CENVAT credit lying unutilized on closure of the unit despite of the fact there is no stock of inputs or finished goods lying in the closed Unit.

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PJ/Case Law/2014-15/2166

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