2009 (1) TMI 225 - AT - Central Excise

Tribunal rules in favor of appellants in CENVAT credit transfer case clarifying Rule 10

The Tribunal ruled in favor of the appellants in a case involving the denial of CENVAT credit due to the lack of permission under Rule 10 of CCR. The ... Transfer of Cenvat Credit – Merger of units – Rule 10 - As per the Show Cause notice, the sole ground for denying the CENVAT credit was that the appellants had not taken permission under Rule 10 of CCR. As per settled law, no such permission was required to be taken by the appellants to avail the balance of CENVAT credit when the erstwhile assessee got merged with KPCL The impugned order, therefore, is not sustainable in law – transfer of credit allowed Issues:1. Denial of CENVAT credit due to lack of permission under Rule 10 of CCR.2. Lack of opportunity for a hearing before passing the impugned order.Analysis:1. The case involved a merger between M/s. United Silicates Pvt. Ltd. and M/s. Kiran Pondy Chems Ltd., where the latter took CENVAT credit of inputs and capital goods from the former without obtaining permission from the department. The Show Cause Notice was issued based on this, proposing to deny the credit. The original authority and the Commissioner (Appeals) confirmed this denial, citing the appellants' failure to satisfy the authorities regarding their eligibility for the credit. However, the appellants argued that no permission was required under Rule 10 of CCR for transferring the credit during a merger. The Tribunal referred to precedents where it was held that no prior permission was necessary as long as the input and capital goods were accounted for to the satisfaction of the department. Ultimately, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeal.2. The appellants also raised a concern about not being afforded an opportunity for a hearing before the Commissioner (Appeals) passed the order. However, the main issue revolved around the denial of CENVAT credit based on the lack of permission under Rule 10 of CCR. Since the Tribunal found that no such permission was required, the lack of a hearing opportunity became secondary to the primary issue. The Tribunal's decision to allow the appeal based on the legal interpretation of Rule 10 resolved the denial of credit, making the lack of a hearing opportunity a moot point in the final judgment.In conclusion, the Tribunal's judgment focused on the interpretation of Rule 10 of CCR regarding the transfer of CENVAT credit during a merger. By clarifying that no prior permission was necessary for such transfers, the Tribunal overturned the denial of credit and allowed the appeal. The lack of a hearing opportunity, while raised by the appellants, did not impact the final decision as the primary issue of credit denial was resolved through legal interpretation.