2014 (7) TMI 192 - AT - Central Excise

Transfer of CENVAT Credit Upheld in Dissolved Firm Case

The Tribunal affirmed the transfer of CENVAT credit amounting to Rs. 40,14,221 from a dissolved partnership firm to the respondent company, rejecting the ... Denialof CENVAT Credit - Transfer of stock credit - As per Rule 57F (21) of the Central Excise Act, 1944 whether the respondents are entitled to transfer of stock of credit of the dissolved firm taken over by the respondent together with its assets and the liabilities of old firm - Held that:- stock of credit can be transferred - Commissioner (Appeals) has rightly allowed the transfer of CENVAT credit to the respondent - Following decision of Aar Aay Products [2002 (7) TMI 204 - CEGAT, NEW DELHI] and Dr. Reddy's Laboratories Ltd. [2005 (3) TMI 327 - CESTAT, CHENNAI]. - Decided against the revenue. Transfer of credit attributable to the issue of settlement of issue of under-valuation - Held that:- Credit cannot be transferred but there is no doubt that this credit is available in the books of dissolved firm and no provisions of Acts/Rules has been produced by the learned A.R., showing that if any credit available in the statutory records on account of settlement of the issue of under-valuation the credit is not transferable - Decided against Revenue. Issues:1. Transfer of CENVAT credit due to dissolution of a partnership firm.2. Entitlement to transfer stock of credit under Rule 57F (21) of the Central Excise Act, 1944.3. Transferability of credit related to under-valuation issue.Issue 1: Transfer of CENVAT credit due to dissolution of a partnership firmThe appeal revolves around the transfer of CENVAT credit amounting to Rs. 40,14,221 from a dissolved partnership firm to the respondent company. The Revenue challenged the transfer, citing the absence of stock at the time of dissolution as a reason for denial. However, the Commissioner (Appeals) allowed the transfer based on the decision in Aar Aay Products vs. CCE New Delhi. The Tribunal upheld the Commissioner's decision, emphasizing that Rule 57F (21) of the CER, 1944 does not prohibit the transfer of such credits. The Revenue's appeal was dismissed, affirming the transfer of CENVAT credit to the respondent.Issue 2: Entitlement to transfer stock of credit under Rule 57F (21) of the Central Excise Act, 1944The key question addressed was whether the respondents had the right to transfer the stock of credit from the dissolved firm to the respondent company along with its assets and liabilities. The Tribunal referred to the precedent set in Aar Aay Products and Dr. Reddy's Laboratories Ltd., confirming that such transfers are permissible under Rule 57F (21) of the Central Excise Act, 1944. Consequently, the Tribunal upheld the decision of the Commissioner (Appeals) to allow the transfer of CENVAT credit to the respondent.Issue 3: Transferability of credit related to under-valuation issueAnother aspect considered was the transferability of credit linked to an under-valuation issue. The Revenue argued that since the credit was due to under-valuation of goods cleared by the dissolved firm, it should not be transferable. However, the Tribunal found no legal provision supporting this argument. As the credit was recorded in the dissolved firm's statutory records, the Tribunal concluded that the credit is transferable. Therefore, the Tribunal dismissed the Revenue's appeal, upholding the decision to allow the transfer of CENVAT credit to the respondent company.This detailed analysis of the judgment highlights the legal complexities involved in the transfer of CENVAT credit following the dissolution of a partnership firm and underscores the importance of legal provisions and precedents in determining the transferability of such credits.