2018 (7) TMI 843 - AT - Central Excise

Tribunal stresses Rule 10(3) compliance for credit transfer, emphasizes verification process importance

The Tribunal remanded the case to the original authority for proper verification and emphasized adherence to Rule 10(3) requirements for credit transfer. ... Transfer of credit - denial of transfer of credit from the predecessor unit namely M/s Varun Enterprises to M/s. Varun Pressing Pvt. Ltd - Rule 10 of the Cenvat Credit Rules, 2004 - the department has sought to deny the credit stating that when the Range Officer visited he was not able to verify for the reason that goods were lying haphazardly on the shop floor - Held that:- If Range Officer would have made effort, he could have physically verified the stock which he failed to do so. For failure of the Range Officer to perform his duty, the credit due is not to be denied to the appellant. In the present case, it is also not stated that the stocks were found short, if found short in what extent. Further, what was the documentary evidences made available at the time of stock verification was not produced. One more opportunity may be granted to the department to cause verification of the documents - appeal allowed by way of remand. Issues:Transference of credit under Rule 10 of Cenvat Credit Rules, 2004; Denial of credit by Commissioner (Appeals) due to inability to verify stocks; Failure to maintain and furnish documentary evidence; Department's contention of goods not properly stocked and unaccounted for; Interpretation of Rule 10(3) of Cenvat Credit Rules, 2004.Analysis:The appeal challenged the denial of transference of credit from a predecessor unit to a successor under Rule 10 of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld the denial, citing inability to verify stocks due to goods lying haphazardly and new goods received during the transfer period. The appellant contended they informed the department and provided necessary information, but the Range Officer failed to verify adequately, leading to a show-cause notice for credit denial and penalties. The department argued the appellant failed to produce stock registers as required by Rule 10(3).The Tribunal analyzed Rule 10(3) which mandates the transfer of credit along with physical stock transfer to the new entity. The appellant declared stock details, but the Range Officer's failure to verify adequately was noted. The Tribunal emphasized that the department did not dispute the physical presence of declared goods, only the verification process. It was highlighted that the Range Officer's duty was to verify properly, and the lack of verification did not justify credit denial. The Tribunal allowed the department one more chance for verification, with any shortages leading to credit disallowance. No penalties were warranted, and proceedings were to conclude within a month.In conclusion, the Tribunal remanded the case to the original authority for proper verification and emphasized adherence to Rule 10(3) requirements for credit transfer. The judgment clarified the importance of thorough verification processes and the need for documentary evidence to support credit claims under the Cenvat Credit Rules, 2004.