EOU unit can transfer accumulated CENVAT credit to successor DTA unit after exit under Rule 10

CESTAT Chennai held that accumulated CENVAT credit can be transferred from an EOU unit to its successor DTA unit after exit from EOU status. The tribunal ruled that under Rule 10, manufacturers can transfer unutilized CENVAT credit during factory transfers, including changes in status. Though EOU and DTA units are separate entities under Central Excise law, the department cannot recover credit belonging to the appellant. Following precedent from Tecumseh Products case, the demand was set aside and appeal allowed.

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Issues:
The issue involves the transfer of accumulated CENVAT credit from an Export Oriented Unit (EOU) to a Domestic Tariff Area (DTA) unit after the EOU's exit from EOU status.

Summary:
The appellants, manufacturers of pistons under CETH 87081090, held EOU status till 13/3/2012, then converted to a DTA unit. They applied for NOC to exit EOU status, carried forward unutilized CENVAT credit to the DTA unit, which the department disputed. The department argued that Rule 10 of CENVAT Credit Rules 2004 does not allow transfer without change of ownership. The appellant contended that as the same legal entity converted from EOU to DTA, the credit should be transferrable. The Tribunal, citing precedents, allowed the appeal, stating that the accumulated credit cannot be denied to both units as they were under the same ownership. The Tribunal held that the department cannot recover the credit belonging to the appellant.

In a separate judgment, the Tribunal further emphasized that the denial of carry forward of accumulated CENVAT credit to assessees debonding from the 100% Exported Oriented Unit scheme to continue operations without privileges is not correct in law. The Tribunal set aside the demand, allowing the appeal with consequential relief.

Overall, the Tribunal ruled in favor of the appellant, allowing the transfer of accumulated CENVAT credit from the EOU to the DTA unit after the EOU's exit from EOU status, based on the legal entity's continuity and ownership structure.

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