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Transfer of Cenvat Credit - Cenvat Credit - Ready Reckoner - Cenvat Credit

Transfer of Cenvat Credit
  • Contents

Chapter 17

Transfer of Cenvat Credit

Statutory Provisions:

Rule 10 of the Cenvat Credit Rules, 2004

 

Transfer of CENVAT credit.-

 (1) If a manufacturer of the final products shifts his factory to another site 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.

 (2) 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.

 (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.

 

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Rule 10 deals with the Transfer of Cenvat Credit in the following situations:

1  Shifting of premises to another site.

2  Change in ownership

3  Sale / Merger / Amalgamation / Lease

4  Transfer of factory to the joint venture

For the situation 2 to 4 as above, transfer should be with the specific provision for transfer of liabilities of such factory.

  • Sale / merger / amalgamation / lease etc. of a factory only

It is possible that instead of selling / merging / amalgamating the whole business of the assessee, only one factory is sold or merged or amalgamated with the another unit. Since for the purpose of Excise each factory is independent unit, such transfer is recognized and transfer of Cenvat Credit is permitted.

  • Conditions and procedure for transferring Cenvat Credit

Rule 10(3) prescribes the conditions and procedure for transfer of Cenvat Credit as: -

-   Transfer 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

-   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.

Important points:

1   Cenvat credit can be transferred even if inputs are not transferred and also it is not necessary to transfer factory to new site.  Refer Fabrico India Pvt. Ltd. 2012 (12) TMI 707 - CESTAT, New Delhi

2  The rules, does not stipulate that the prior permission from the Deputy Commissioner or Assistant Commissioner must be obtained – Refer Solaris Bio-Chemicals Ltd. 2004 (10) TMI 155 - CESTAT, MUMBAI.

 
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