Successor liability for CENVAT credit on capital goods rejected where purchaser did not avail seller's credit

Duty equivalent to CENVAT credit originally taken by a seller on capital goods could not be demanded from the purchaser where the assets were bought as used machinery and not as a transfer of the running business. Rule 57AB(1C) of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001 apply when capital goods on which credit has been taken are removed as such by the manufacturer who availed the credit. As the purchaser had not availed the seller's credit and no excise dues were confirmed against the seller, successor liability was not established. The related interest and penalties also could not survive.

---

---

Issues: Whether duty equivalent to CENVAT credit originally availed by the seller of capital goods could be demanded from the purchaser when the assets were bought and later transferred to a sister concern, and whether the consequential interest and penalties could stand.

Analysis: The capital goods were found to have been purchased as assets from the earlier unit, not as a transfer of the running business, and the purchaser had not availed the CENVAT credit taken by the seller. The liability under Rule 57AB(1C) of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001 applies when capital goods on which credit has been taken are removed as such from the factory by the manufacturer who availed the credit. The goods here had been used by the seller and were not shown to have been removed as such by the purchaser; therefore, the seller's credit could not be fastened on the purchaser. The demand could not be sustained on the basis of successor liability in the absence of any excise dues confirmed against the seller.

Conclusion: The demand was unsustainable against the assessee and the proposed interest and penalties also failed.

---