2009 (10) TMI 326 - AT - Central Excise

Cenvat Credit- Transfer of unit- The appellants had taken input duty credit to the extent of over Rs. 2.8 crores on components and parts of boiler turbine and pollution control equipment during the period 1995-2000. The Commissioner of Central Excise has disallowed this credit on the ground that during the said period the said components and parts of machinery were not available in the assessee s factory at Achithur. Held that- denial of credit in present order even after being allowed by Commissioner (Appeals) grossly unfair and unjust. Impugned order is set aside.

Summary

Issues:
1. Disallowance of input duty credit on components and parts of machinery.
2. Entitlement to transfer of credit under Rule 8 of the CENVAT Credit Rules.
3. Interpretation of Rule 8 in the context of factory shift and utilization of credit.
4. Applicability of Rule 8 to the case of transferred unit and utilization of inputs.

Analysis:
1. The issue of disallowance of input duty credit on components and parts of machinery was considered by the Appellate Tribunal. The appellants had availed credit during a specific period, which was later disallowed by the Commissioner of Central Excise. However, it was noted that a previous dispute regarding similar credit had been resolved in favor of the appellants by the Commissioner (Appeals) in an earlier order. The Tribunal found the ground for disallowance of credit untenable based on the previous appellate authority's decision, which had become final due to the lack of challenge by the Department.

2. The question of entitlement to transfer the credit under Rule 8 of the CENVAT Credit Rules was raised by the appellants' counsel. The counsel argued that the credit allowed by the lower appellate authority pertained to the earlier period and was not connected to the subsequent transfer of the unit or machinery. It was emphasized that the ownership of the assets remained with the appellants even after the transfer of the unit, and the credit should not be denied based on the transfer.

3. The interpretation of Rule 8 in the context of factory shift and credit utilization was crucial in this case. The Tribunal analyzed the provisions of Rule 8, which allow for the transfer of unutilized credit when a factory shifts to a new site along with the transfer of inputs and capital goods. It was observed that in this case, the unit had been transferred before the credit was allowed by the lower appellate authority. The Tribunal concluded that Rule 8 did not apply to the situation where inputs had already been utilized, and there was no unutilized credit left to be transferred.

4. The applicability of Rule 8 to the case of the transferred unit and the utilization of inputs was further discussed. The Tribunal highlighted that the dispute over the credit had delayed its utilization for clearance of finished goods. It was deemed unfair to deny the appellants the benefit of the credit, especially after the lower appellate authority had allowed it. The Tribunal concluded that there was no provision in the rules to deny the appellants the right to utilize the credit and, therefore, set aside the impugned order and allowed the appeal with consequential benefits to the appellants.