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Issues: Whether Cenvat credit on inputs and capital goods was liable to be denied on sale of only a part of the factory and whether Rule 10 of the Cenvat Credit Rules, 2004 applied to such transaction.
Analysis: The transfer involved only the Allethrin business and not the entire factory. The same premises and manufacturing set-up continued with the appellant, and the facility was leased back immediately thereafter. On these facts, there was no real cessation of manufacture or factual removal of the inputs and capital goods from the appellant's control so as to require reversal of credit. The situation was distinguishable from a complete transfer of a division with separate registration. The credit on inputs used in or in relation to manufacture and on capital goods used in the factory therefore remained available, and the transaction did not attract the operation of Rule 10 in the manner contended by the Revenue.
Conclusion: The denial of Cenvat credit was unsustainable and the issue was decided in favour of the appellant.
Ratio Decidendi: Where only a part of the manufacturing business is sold and the factory continues under the manufacturer's control, with the facility leased back and manufacture continuing, Cenvat credit on inputs and capital goods does not lapse merely because of the transaction, and Rule 10 is not attracted as if there were a complete transfer of the factory.
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