Cenvat credit transfer on factory shift is not limited to physical stock value if inputs and capital goods are accounted for.

Rule 8 of the Cenvat Credit Rules, 2002 permits transfer of unutilized Cenvat credit when a manufacturer shifts a factory to another site, so long as the stock of inputs or capital goods is also transferred and the goods on which credit was taken are duly accounted for to the Commissioner's satisfaction. The transfer is not restricted to the value of the physical stock of inputs moved. On the stated facts, the inputs and capital goods were accepted as transferred and accounted for, so the demand to limit the credit transfer to the stock value was unsustainable and the reversal demand could not stand.

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Issues: Whether, on shifting a factory to a new site, the assessee was entitled to transfer the unutilized Cenvat credit to the new factory even if the credit exceeded the amount corresponding to the physical stock of inputs transferred.

Analysis: Rule 8 of the Cenvat Credit Rules, 2002 permits transfer of unutilized Cenvat credit when a manufacturer shifts the factory to another site, provided the stock of inputs or capital goods is also transferred and the inputs or capital goods on which credit has been availed are duly accounted for to the satisfaction of the Commissioner. The rule does not impose a restriction that the transferred credit must be confined only to the value of the inputs physically moved. In the present case, the departmental authorities had accepted that the inputs and capital goods were duly accounted for and transferred along with the credit balance.

Conclusion: The transfer of the available Cenvat credit was permissible in law, and the demand raised by restricting it to the quantum of inputs transferred was unsustainable.

Final Conclusion: The assessee succeeded, and the order demanding reversal of credit was set aside.

Ratio Decidendi: On shifting a factory, unutilized Cenvat credit may be transferred along with the factory if the transferred inputs or capital goods are duly accounted for, and such transfer is not confined to credit matching only the physical stock of inputs moved.

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