CENVAT credit transfer to a new unit upheld despite no physical movement of inputs or capital goods.

Transfer of unutilized CENVAT credit from a closed unit to a new unit was upheld where the assessee informed the department of closure, cleared inputs and finished goods on payment of duty, surrendered registration, and obtained permission for transfer. The absence of physical movement of inputs and capital goods was not treated as fatal, because the clearance on duty payment satisfied the transfer arrangement and the rules did not require a rigid one-to-one correlation between transferred goods and the credit shifted. Disallowance of the credit was therefore unsustainable.

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Issues: Whether the appellant was entitled to transfer and avail unutilized cenvat credit from the closed unit to the new unit despite the alleged absence of physical transfer of inputs and capital goods.

Analysis: The appellant had informed the department of the closure of the old unit, cleared inputs, semi-finished goods and finished goods on payment of duty, surrendered registration, and sought transfer of the balance credit to the new unit. The departmental record also showed that permission for transfer of the unutilized credit was subsequently granted. On the facts, the clearance of goods on payment of duty was treated as sufficient compliance with the transfer arrangement, and the denial of credit on the ground of absence of physical movement was found unsustainable. The reasoning in the cited decisions was accepted to the extent that the rules do not require a rigid one-to-one correlation between the quantum of inputs physically transferred and the available credit sought to be shifted.

Conclusion: The appellant was entitled to transfer and avail the unutilized cenvat credit at the new unit, and the disallowance of credit was incorrect.

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