CENVAT CREDIT RULES – TRANSFER OF CREDIT

[Dr. Sanjiv Agarwal]

Transfer of Cenvat Credit (Rule 10)

If a manufacturer of the final products shifts his factory to another site or location or the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory to a joint venture with the specific provision for transfer of liabilities of such factory, then, the manufacturer shall be allowed to transfer the Cenvat credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated factory.

If a provider of output service shifts or transfers his business on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the business to a joint venture with the specific provision for transfer of liabilities of such business, then the provider of output service shall be allowed to transfer the Cenvat credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated business.

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 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.

In CCE, Kolkata-III v. Amar Traders Ltd. 2007 (9) TMI 150 - CESTAT KOLKATA , where two companies were merged and stock transferred to newly formed company and also intimated to the department, it was held that benefit already accrued before merger cannot be denied and assessee was entitled to take benefit of Cenvat Credit.

In Heubach Colour Pvt. Ltd. v. CCE, Surat 2012 (1) TMI 114 - CESTAT AHMEDABAD, where assessee transferred the credit to same company situated at different place, first appellate authority had recorded the following findings, as regards transfer of unutilized Cenvat credit in two amalgamated companies .

In CCE, Madurai v. Rajshree Sugars and Chemicals Ltd 2013 (6) TMI 654 - MADRAS HIGH COURT, since decision for single registration of assessee was in tune with management, administration and control of two units under same head, it was held that where assessee was granted single registration in place of two separate registrations of two divisions in same premises, credit pertaining to one division could be transferred to Cenvat credit register of another division, as Cenvat credit could be used for payment of duty on any product. Hence, plea of Revenue that on mere taking of single registration, there was merger/amalgamation/transfer which disentitled assessee from credit adjustment of duty payable on sugar manufactured, was to be rejected, as there was no transfer of units as understood in legal parlance. [Cases relied: K.M. Sugar Mills Ltd v. CCE, Allahabad 2001 (9) TMI 300 - CEGAT, NEW DELHI ; Kesar Enterprises Ltd v. CCE, Lucknow 2003 (3) TMI 220 - CEGAT, NEW DELHI].

In Hindustan Coca-Cola Beverages (P) Ltd. v. Union of India 2013 (11) TMI 512 - GUJARAT HIGH COURT, where on merger, unutilized credit lying with amalgamating company gets transferred to amalgamated company automatically by virtue of rule 10, it was held that it was not a case where amalgamated company is to be granted refund by virtue of order of an appellate authority.

Transfer of Cenvat Credit of Additional Duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act (Rule 10A)

Vide Notification No. 18/2012-CE (NT) dated 17.03.2012, new Rule 10A has been inserted to allow for transfer of Cenvat credit of additional duty leviable u/s 3 (5) of Customs Tariff Act.

Accordingly, a manufacturer or producer of final products having more than one registered premises, on the basis of common Income Tax Permanent Account Number may be allowed transfer of unutilized Cenvat credit of additional duty lying in balance in any of his registered premises to his other registered premises, as at the quarter end by -

1. making an entry for such transfer in the documents maintained under rule 9;
2. issuing a transfer challan containing registration number, name and address of the registered premises transferring the credit and receiving such credit, the amount of credit transferred and the particulars of such entry as mentioned in clause (i), and such recipient's premises may take Cenvat credit on the basis of the transfer challan.

Also, there will be a requirement of submitting a monthly return separately in respect of transferring and recipient registered premises by the manufacturer / producer.

In G.R. Polyfilms Pvt Ltd v. CCE, Kolkata-V, 2014 (7) TMI 1052 - CESTAT KOLKATA, where assessee had availed Cenvat credit on special additional Duty/ special CVD, it was held that by issuance of Notification No 13./2005-CE (NT) SAD, special CVD @ 4% levied under section 3(5) of Customs Tariff Act, 1975 was included in list of duties specified under Rule 3 of Cenvat Credit Rules, 2004 from 1.3.2005. Hence, payment of SAD special CVD @ 4% by assessee, importer, was evident from dealer’s invoices and as such, Cenvat credit could not be denied.