Cenvat credit transfer on amalgamation: no prima facie liability where the effective date left no credit balance to .

A prima facie case for waiver of pre-deposit was found where the amalgamation became effective only from 01.06.2005, leaving the appellant and the erstwhile company as separate entities before that date. Because the available Cenvat credit on 12.05.2005 had already been utilised by the erstwhile company during May 2005 and no balance remained on the effective date, there was no basis to treat any credit balance as transferable before amalgamation. On that reasoning, the departmental demand for Cenvat credit, interest and penalty was held unsustainable at the interim stage, and pre-deposit was waived with recovery stayed pending appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery in relation to the demand of Cenvat credit, interest and penalty, having regard to the effective date of amalgamation.

Analysis: The order recorded that the amalgamation of the appellant with the erstwhile company had been approved by the High Court with effect from 01.06.2005. On that basis, the appellant and the erstwhile company were separate entities prior to that date, and there was no question of transfer of Cenvat credit balance before the amalgamation became effective. The available credit on 12.05.2005 was found to have been utilised by the erstwhile company during May 2005, and no balance remained on 01.06.2005. In these circumstances, the departmental case was held to be unsustainable at the prima facie stage.

Conclusion: The requirement of pre-deposit was waived and recovery of the demand, interest and penalty was stayed pending disposal of the appeal.

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