2005 (3) TMI 327 - AT - Central Excise

Transfer of Input Duty Credit Upheld Despite Pre-Ownership Use

The Tribunal upheld the Commissioner's decision allowing the transfer of unutilized input duty credit from a company acquired through amalgamation, ... Cenvat/Modvat Issues:Transfer of Cenvat credit on inputs due to amalgamation of companies.Analysis:The case involved M/s. Dr. Reddy's Laboratories Ltd., engaged in manufacturing medicaments, who acquired a gelatin capsule factory from M/s. American Remedies Limited (ARL) through amalgamation. The issue was the transfer of unutilized input duty credit from ARL's Cenvat account to Dr. Reddy's account. The Commissioner allowed the transfer, leading to an appeal by the Revenue.The Revenue argued that under Rule 57AF, credit transfer required physical transfer of inputs, which did not happen in this case. However, the respondents contended that such a condition was not specified in the rule. They cited a Tribunal decision in Aar Aay Products Pvt. Ltd. v. CCE, New Delhi, where a similar transfer was allowed even when the inputs were already utilized by the transferor. The Tribunal found the provisions of Rule 57AF akin to the previous Rule 57F(21) and upheld the transfer based on the cited case law.The Tribunal held that the Commissioner was justified in allowing the transfer of input credit from ARL to Dr. Reddy's, despite the inputs being used before the amalgamation and not physically available during the transfer of ownership. Consequently, the impugned order was upheld, and the appeal by the Revenue was dismissed.In conclusion, the judgment clarified that under Rule 57AF, the physical availability of inputs at the time of ownership transfer was not a prerequisite for the transfer of unutilized input duty credit. The decision was based on precedent and the interpretation of relevant legal provisions.