2010 (9) TMI 453 - AT - Central Excise

Transfer of credit between partnership and private limited firms without formal permission upheld by Tribunal

The Tribunal held that no formal permission was required for the transfer of credit from a partnership firm to a Private Limited firm under Rule 10 of the ... Cenvat credit – Transfer of credit - partnership firm converted into a Private Limited - Tribunal stated that no formal permission required from the Central Excise officers - denial of credit on this ground not justified – DR stated that admissibility of credit on merits has not been adjudged by the lower authorities, - remand the matter to the proper Central Excise officer to decide on the availability or otherwise of the credit on merits Issues: Partnership firm converted into a Private Limited firm, availment of modvat credit without permission, denial of credit by Revenue, interpretation of Rule 10 of Cenvat Credit Rules, Tribunal decisions on transfer of credit.Analysis:1. The case involved the conversion of a partnership firm into a Private Limited firm, leading to the transfer of accumulated modvat credit from the old unit to the new unit. The appellant initially availed the credit and informed the Revenue, but later reversed it due to an audit objection regarding the permission for such credit availing.2. The Revenue objected to the appellant's re-credit without seeking formal permission, citing the decision in BDH Industries Limited v. CCE (Appeals), Mumbai, which required filing a claim for refund with the Central Excise authorities for every refund. The authorities below confirmed the denial of credit and imposed interest accordingly.3. The appellant argued that Rule 10 of the Cenvat Credit Rules allows for the transfer of credit without needing permission from the Central Excise authorities. They referred to Tribunal decisions in cases like Hewlett Packard (I) Sales (P) Limited and Solaris Bio-chemicals Limited, where similar credit transfers were deemed permissible without formal permission under identical circumstances.4. The learned DR contended that while permission may not be required, the lower authorities did not assess the admissibility of credit on its merits, and the credit was confirmed without proper evaluation.5. Upon considering the submissions and the Tribunal decisions cited, the Tribunal agreed with the appellant that no formal permission was necessary for credit transfer as per Rule 10. The denial of credit solely on this ground was deemed unjustified, leading to the setting aside of the impugned orders. However, to address the issue of credit admissibility on merits, the matter was remanded to the Central Excise officer for a proper evaluation. The appeals were disposed of accordingly.