Appellate Tribunal rules in favor of appellant in Cenvat credit transfer case

The Appellate Tribunal CESTAT Ahmedabad ruled in favor of the appellant in a case concerning the denial of Cenvat credit due to early transfer of credit between units. The Tribunal found that although the transfer of credit occurred before the due date as per the rules, the appellant had paid interest for the period in question, and the early transfer did not impact revenue. It was determined that the denial of credit solely based on the early transfer was unjustified. The impugned order was set aside, and the appeal was allowed with consequential relief on 06.02.2023.

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Issues: Denial of Cenvat credit due to early transfer of credit between units.

The judgment by the Appellate Tribunal CESTAT Ahmedabad dealt with the denial of Cenvat credit to the appellant by the Revenue because the credit from another unit was transferred to the appellant's unit before the due date, as required under Rule 10A of the Cenvat Credit Rules, 2004. The appellant argued that although there was a procedural lapse in transferring the credit before the due date, they had paid interest for the period between when the credit was due and when it was taken. The appellant contended that the denial of Cenvat credit was based on an audit conducted at the transferor unit, and since the issue was resolved with the payment of interest, the credit should not have been denied. The Revenue, represented by the Superintendent, reiterated the findings of the impugned order denying the Cenvat credit.

Upon considering the submissions from both sides and examining the record, the Tribunal noted that the denial of Cenvat credit was based on the transfer of credit from one unit to another of the same assessee company not being done at the end of the quarter as required by Rule 10A. The credit was transferred earlier than the prescribed dates for two quarters. However, it was observed that the credit transferred was already paid duty, and the early transfer did not have any revenue implications. The Tribunal highlighted that the appellant had paid interest for the early transfer and availed the credit accordingly. The Tribunal emphasized that the denial of credit solely due to early transfer was not justified.

Furthermore, the Tribunal pointed out that any lapse in the transfer of credit was on the part of the transferor unit, which had resolved the issue with the audit and payment of interest without further action. Therefore, the Tribunal concluded that the denial of Cenvat credit to the appellant was unwarranted. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief. The judgment was pronounced in open court on 06.02.2023.

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