Appellate Tribunal CESTAT ruling: Reversal of Cenvat credit on inter-unit transfer, duty payment. Significant judgments cited.

The Appellate Tribunal CESTAT, Chennai, held that during the relevant period, the appellant was required to reverse the Cenvat credit on inputs and capital goods when clearing them to a sister unit or pay duty at a higher rate. The Tribunal referred to significant judgments and allowed the appeals of the assesses, setting aside the impugned order. The Revenue's appeal for imposing a penalty was rejected. The judgment was pronounced on 02.05.2012, disposing of all three appeals.

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Issues:
- Whether the appellant is required to reverse the Cenvat credit availed on inputs and capital goods while clearing them to its sister unit or pay duty at a higher rate applicable at the time of clearance.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Chennai, involved three appeals, two by assesses and one by the Revenue, all disposed of by a common order due to the identical issue at hand. The central issue was whether the appellant must reverse the Cenvat credit on inputs and capital goods when clearing them to a sister unit or pay duty at a higher rate during clearance. The Tribunal referred to three significant Larger Bench judgments to settle the matter, including CCE, Coimbatore Vs. American Auto Service 1996 (81) ELT 71 (Tri. - LB), CCE, Vadodara Vs. Asia Brown Boveri Ltd. 2000 (120) ELT 228 (Tri. LB), and Eicher Tractors Vs. CCE, Jaipur 2005 (189) ELT 131 (Tri.- LB). The Tribunal held that during the relevant period, the reversal of Cenvat credit originally taken was mandated at the time of clearance of inputs/capital goods. By applying the ratio of the aforementioned decisions, the impugned order was set aside, and the appellants' appeals were allowed. Consequently, the Revenue's appeal for imposing a penalty was deemed infructuous and rejected. The judgment was pronounced in open court on 02.05.2012, and all three appeals were disposed of accordingly.

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