Transfer of unutilised Cenvat credit on factory shifting allowed where inputs were not shown to have been removed outside.

Unutilised Cenvat credit may be transferred on shifting or transfer of a factory under Rule 10 where the inputs or stock in process are transferred with the unit, and the department does not establish that the raw material was removed outside the earlier premises. On the facts noted, the correspondence showed a request to transfer the entire stock of inputs along with capital goods, and the denial of credit was not supported by evidence of clearance outside the unit. The transfer of credit was therefore allowable and the credit denial was not sustainable.

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Issues: Whether Cenvat credit lying unutilised in the account of the earlier unit could be transferred to the appellant on shifting and transfer of the manufacturing unit, where the department disputed transfer of the raw material stock.

Analysis: Rule 10 permits transfer of unutilised credit when the factory is shifted or transferred, provided the stock of inputs as such or in process is also transferred. The correspondence showed that the appellant had sought transfer of the entire stock of inputs along with capital goods, and the department had not established that the raw material was cleared outside. Even assuming there was no simultaneous stock of inputs at the old premises, the credit could still not be denied in view of the settled position that transfer under Rule 10 is permissible in such circumstances.

Conclusion: The denial of Cenvat credit was not sustainable, and the transfer of credit was held allowable in favour of the appellant.

Ratio Decidendi: Transfer of unutilised Cenvat credit on shifting or transfer of a factory cannot be denied where the facts do not show removal of the earlier unit's inputs outside and the conditions of Rule 10 are otherwise substantially satisfied.

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