Custom, Excise & Service Tax Tribunal
Cce, Chennai vs M/S. Supreme Petrochem, Ltd on 5 October, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI E/254/2012 & E/CO/5054/2012 (Arising out of Order-in-Appeal 06/2012 (M-I) dated 12.01.2012, passed by the Commissioner of Central Excise (Appeals), Chennai). CCE, Chennai : Appellant Vs. M/s. Supreme Petrochem, Ltd. : Respondent
Appearance Shri B. Balamurugan, AC (AR) For the appellant Shri. M. Karthikeyan, Adv., For the respondent CORAM Honble Shri P.K. CHOUDHARY, Judicial Member FINAL ORDER No. 41445 / 2015 Date of Hearing/Decision: 05.10.2015 Revenue filed this appeal against the Order of the Commissioner (Appeals) dated 12.01.2012.
2. The brief facts of the case are that M/s. Supreme Petrochem, Ltd., are manufacturers of Expandable Polystyrene Resins falling under CETSH 3903 1100 of CETA, 1985. Vide Honble High Court of Madras Order dated 16.06.2008, M/s. SPL Polymers Ltd. amalgamated with the respondents M/s. Supreme Petrochem, Ltd. Consequent to amalgamation, the respondents vide letter dated 14.07.2008 applied for transfer of cenvat credit lying unutilized in the accounts of M/s. SPL Polymers Ltd. The Asst. Commissioner vide letter dated 17.03.2009 permitted the respondents to transfer unutilized credit of Rs. 42,64,679/- against their total claim of Rs. 87,17,640/-. There was no order permitting transfer of unutilized credit of Rs. 44,52,961/-. Vide SCN dated 13.07.2009, the Jt. Commissioner denied the transfer of unutilized credit of Rs.44,62,413/- along with interest and penalty attributable to inputs, not in stock and proposed to recover the amount of unutilized credit already transferred. On adjudication, the Asst. Commissioner vide OIO No. 6/2009 dated 21.12.2009, confirmed the demand of Rs. 44,62,413/- along with interest and imposed a penalty of Rs. 5,00,000/-. The findings of the adjudicating authority is based on the following facts:
(i) Only if the stock of inputs as such or in process, or the capital goods are available then only transfer of credit is permissible
(ii) Boards instruction in Circular No. 1/93-CX.8 dated 05.01.1993 categorically state that credit to the extent contained in lying in stock and/or (ii) in process and (iii) contained in the final products lying in stock is only liable to be transferred and any credit in excess of this amount would lapse;
(iii) that Rs. 44,62,413/- availed as credit in excess of the credit attributable to the inputs which were lying in stock and/or (ii) in process and (iii) contained in the final products lying in the stock, is recoverable with interest from the assessee under Rule 14 of the CCR r/w Section 11A and 11AB of CEA, 1944;
(iv) that the Respondent have availed such credit in contravention of Rule 10 of the CCR, 2004 and hence, liable for penalty under Rule 15 of CCR, 2004.
On appeal, vide OIA dated 12.01.2012, the Commissioner (Appeals) allowed the transfer of unutilized credit at the time of amalgamation and allowed the assessees appeal. OIA was reviewed by the Committee based on Direction/Authorization order issued dated 02.04.2012. The Revenue filed the present appeal on the ground that Rule 10(3) of CCR do not permit such transfer of unutilized credit. Hence the present appeal.
3. The Ld. AR, Shri B. Balamurugan, AC., on behalf of the Revenue submits that unutilized credit is not transferable as there is no provision under Rule 10 of the Cenvat Credit Rules, 2004 for transfer of credit without transfer of inputs relating to such credit balance. He reiterated the grounds of appeal and submits that as per Rule 10 of the Cenvat Credit Rules, 2004, when a manufacturer of the final products shifts his factory to another site or the factory is transferred on account of change in the 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. He further submits that Boards instruction in Circular No. 1/93-CX.8 dated 05.01.1993, categorically states that credit to the extent contained in lying in stock and/or (ii) in process and (iii) contained in the final products lying in stock is only liable to be transferred and any credit excess of this amount would lapse. This circular was brought out in the OIO and the Commissioner (Appeals) has conveniently has not taken note of this at all. He further submits that the Order passed by the Commissioner (Appeals) is not legal and proper and hence liable to be set aside and the Order of the adjudicating authority to be restored.
4. The Ld. Counsel on behalf of the respondents Shri M.Karthikeyan, submits that there was no stipulation under Rule 10(3) of CCR, 2004, that the transfer of credit would be restricted to the credit attributable to the physical stock of inputs lying as such or in process with the transferee factory which is transferred to the transferee factory. The only restriction is that whatever stock of inputs is lying with the transferee factory should also be transferred to the transferee factory. He further submits that the issue in dispute is no more res integra as it has been held in a plethora of decisions that the credit of cenvat is transferable even if there is no corresponding stock of inputs available at the point of time. He relies on the following case laws :-
1. Sunpack Vs. CCE. Pondicherry 2008 (223) ELT 95 (Tri.-Chen.)
2. CCE, Pondicherry Vs. Cestat 2008 (230) ELT 209 (Mad.)
3. Shree Rama Multi-tech Ltd. Vs. CCE, Pondicherry 2007 (217) ELT 136 (Tri.-Chen.)
4. CCE, Pondicherry Vs. Cestat 2009 (240) ELT 367 (Mad.)
5. Kevin Enterprises Pvt. Ltd. Vs. CCE, Vadodara 2007 (219) ELT 181 (Tri.-Mum.)
6. AAR AAY Products Pvt. Ltd. Vs. CCE, N.Delhi 2003 (157) ELT 40 (Tri.-Del.)
7. New Chemi Industries Ltd. Vs. CCE, Mumbai 2005 (191) ELT 614 (Tri.-Mum.)
8. CCE, Bangalore Vs. Tata Auto Comp. Systems Ltd.
2009 (239) ELT 130 (Tri.-Bang.)
9. CCE, Bang. Vs. Tata Auto Components Systems Ltd.
2013 (29) STR 105 (Kar.)
5. After hearing both sides and on perusal of records, I find that the issue has been dealt with in much details by the Ld. Commissioner (Appeals). The relevant portion of the said order is reproduced for better appreciation of facts and law on the point and also the decisions of the coherent Benches and Honble Supreme Court as cited by him:
5.0. I find from the records that the Show cause notice was issued to the appellant for the excess credit availed between the unutilized input credit transferred at the time of amalgamation and the proportionate credit involved on inputs and work in progress inputs that are actually transferred. The Department had relied on Rule 10 of Cenvat Credit Rules, 2004 and Boards instructions in Circular No. 1/93-CX.8 dated 05.01.93. I find that the appellant had intimated the Department about the amalgamation of the companies as per Honble Madras High Courts order and had asked permission to the Jurisdictional Divisional office to transfer credit lying in the accounts of SPL Polymers Ltd as per Rule 10 of the Cenvat Credit Rules, 2004. The Divisional Assistant Commissioner after verification by the Range officer had allowed the Cenvat Credit on Capital Goods and Service tax fully whereas the input credit was allowed to the tune of Rs. 42,64,679/-The Department denied the transfer of credit based on Rule 10(3) of Cenvat Credit Rules 2004., which is reproduced below:
10(3) : The transfer of the Cenvat Credit under Sub-rule (1) and (2) shall be allowed only if the stock of inputs as such or in process, or the capital gooda 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 or are duly accounted for to the satisfaction of the Deputy Commissioner of Central Excise or, as the case may be, Assistant Commissioner of Central Excise. It is very clear that the requirement of transfer of inputs would come into picture only if available and otherwise, the transfer of credit cannot be objected to if there was no stock of inputs. This is a deterrent clause to prevent taking of Cenvat credit for a second time, in the case of inputs lying in stock. It is not the case of the department that the inputs were not received in the factory at the time of taking the credit or there was a short receipt of inputs. Once the inputs are properly accounted and credit taken to the satisfaction of the Jurisdictional Central excise officer, it cannot be restricted at the time of amalgamation proportionate to the transferred inputs. Reasonably, when the appellant had undertaken all liabilities, assets, contingent liabilities, duties, obligations and guarantees of the M/s SPL Polymers Ltd, they are eligible for transfer of unutilized credit lying the in the accounts of M/s SPL Polymers Ltd. It is pertinent to mention that Honble CESTAT, Bangalore in the case or M/s Tata Auto Comp Systems Ltd Vs CCE, Bangalore (2008 TIOL 2321- CESTAT-BANG) had held that the assessee is eligible to avail unutilized cenvat balance lying in the books in the factory transferred to another ownership without physical transfer to any inputs or capital goods. On perusal of the Honble High Courts order in C.P. No. 91/2008 dated 16.06.2008, and other relevant documents, I find that it is not the case of transfer of capital goods and inputs from one company to another. But, it is an amalgamation of M/s. SPL Polymers Ltd. with M/s. Supreme Petrochem Ltd., which have become one entity on amalgamation. The new entity is entitled to Cenvat credit which was lying unutilized in the accounts of the amalgamating company ie., SPL Polymers Limited.
6. The Honble High Court of Karnataka has upheld the order of the CESTAT Bangalore in Tata Auto Comp. Systems Ltd.(supra), which is reproduced as under:-
4.?A perusal of the aforesaid Rules makes it very clear that if manufacturer of the final products shifts his factory to another site, the manufacturer shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred factory. The said transfer is subject to the condition stipulated in Rule 10(3) of the Rules, which provides that such transfer is permitted only if the stock of inputs as such or in process, or the capital goods is also transferred alongwith the factory or business premises to the new site, 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. Therefore once the aforesaid condition is satisfied, the assessee is entitled to the benefit of Cenvat credit at the transfer site. In the light of the factual findings recorded in the proceedings by the Authorities that the credit has been availed of duly accounted to the satisfaction of the Authority, there is no case of double benefit as sought to be made out by the Assessing Authority. The Commissioner as well as the Tribunal are justified in setting aside the order and restoring the benefit to the assessee. The ratio of the above order squarely applies to the present case and in the present case there is no involvement of any transfer. Further, the Honble High Court of Madras in the case of CCE, Pondicherry Vs. Cestat (supra) has upheld this Tribunals order and rejected the Revenues appeal.
7. By respectfully following the above, I hold that the appellants are eligible for Cenvat credit. I do not find any infirmity in the impugned order. I uphold the order of the Commissioner (Appeals). The Revenue appeal is rejected. The cross objection filed by the respondent is disposed of accordingly.
(Operative part of the Order dictated and pronounced in the open Court on 05.10.2015) (P.K. CHOUDHARY) JUDICIAL MEMBER BB 1