Cenvat credit transfer limited to a full factory shift; moving only one unit does not qualify under Rule 8.

Rule 8 of the Cenvat Credit Rules, 2002 permits transfer of unutilised Cenvat credit only when the factory as a whole is shifted to another site or transferred on specified events such as change in ownership, sale, merger, amalgamation, lease or transfer to a joint venture. Where only one unit of a composite manufacturing set-up, such as a spinning plant, is moved and the remaining units continue at the original premises, the credit transfer facility does not apply. A part of a factory cannot be treated as the factory itself for this purpose, so transfer of Cenvat credit was not available on these facts.

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Issues: Whether Cenvat credit could be transferred when only the spinning unit of the factory was shifted to another site, and whether such transfer was permissible under Rule 8 of the Cenvat Credit Rules, 2002.

Analysis: Rule 8 permits transfer of unutilised Cenvat credit only when the factory as such is shifted to another site or is transferred on account of change in ownership, sale, merger, amalgamation, lease, or transfer to a joint venture. The provision also contemplates transfer of the stock of inputs and capital goods along with the factory. On the facts found, only one unit of the composite manufacturing set-up, namely the spinning plant, was shifted, while the remaining manufacturing units continued at the original site. In light of Section 2(e) of the Central Excise Act, 1944, a factory may include part of a premises for manufacturing, but a part of a factory cannot be treated as the factory itself for the purpose of Rule 8. The rule therefore did not extend to transfer of credit where only a segment of the factory was moved.

Conclusion: The assessees were not entitled to transfer of Cenvat credit under Rule 8, because only a part of the factory was shifted and not the factory as a whole. The Revenue's appeals succeeded.

Ratio Decidendi: Transfer of unutilised Cenvat credit under Rule 8 is available only on transfer or shifting of the factory as a whole, and not when only one unit or part of a composite factory is shifted to another site.

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