Transfer of unutilised Cenvat credit on DTA-to-EOU conversion permitted absent express bar; extended limitation requires suppression or wilful misstatement.

Unutilised Cenvat credit standing in the books of a DTA unit may be transferred on conversion into a 100% EOU where Rule 10 of the Cenvat Credit Rules, 2004 contains no express prohibition against such carry forward. The commentary distinguishes the pre-2004 regime and notes that credit existing on the date of conversion is transferable when the statute does not deny that consequence. It also states that the extended period of limitation cannot be invoked unless suppression of facts or wilful misstatement is shown, and that departmental knowledge of the conversion and credit position defeats such invocation.

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Issues: (i) Whether unutilised Cenvat credit lying in the books of a DTA unit could be transferred on conversion of the unit into a 100% EOU. (ii) Whether the demand was barred by limitation on the ground that the extended period could not be invoked.

Issue (i): Whether unutilised Cenvat credit lying in the books of a DTA unit could be transferred on conversion of the unit into a 100% EOU.

Analysis: The transfer of credit was examined in the light of Rule 10 of the Cenvat Credit Rules, 2004 and the absence of any express prohibition against carrying forward the credit on conversion of the unit. The earlier view that credit would lapse under the older regime was found inapplicable because the dispute related to the period after the Cenvat Credit Rules, 2004 came into force. The reasoning followed the Tribunal's earlier view that credit lying in the books on the date of conversion is transferable when the statute does not deny such transfer.

Conclusion: The transfer of unutilised Cenvat credit was held to be permissible, in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation on the ground that the extended period could not be invoked.

Analysis: The record showed that the conversion and the existence of unutilised credit were known to the department, including through the returns filed by the assessee. In those circumstances, the ingredients necessary for invoking the extended period, namely suppression of facts or wilful misstatement, were not established.

Conclusion: The invocation of the extended period of limitation was not sustainable, in favour of the assessee.

Final Conclusion: The demand was set aside on both merits and limitation, and the appeal succeeded.

Ratio Decidendi: In the absence of an express statutory bar, unutilised Cenvat credit existing at the time of conversion from a DTA unit to a 100% EOU is transferable under the governing credit rules, and the extended period cannot be invoked without proof of suppression or wilful misstatement.

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