CENVAT credit cannot be denied after factory shift where entitlement had already attained finality and inputs were duly used.

Credit validly earned on inputs could not be denied merely because the factory had already shifted, where the governing rule only permits transfer of unutilized credit on relocation of the unit. The credit dispute related to inputs used long before the shift, and entitlement to that credit had already attained finality in an earlier appellate order that the Department had not challenged. A later transfer of the finished equipment to a sister concern did not affect the credit already earned on those inputs. Denial of CENVAT credit in these circumstances had no legal basis, and the assessee was held entitled to the credit.

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Issues: Whether CENVAT credit could be denied on the ground that the factory had shifted and the credit was not transferred in the manner contemplated by the rules.

Analysis: The relevant rule permits transfer of unutilized credit when a factory shifts to a new site and the inputs or capital goods are transferred to that site. On the facts, the credit dispute related to inputs already utilized long before the shift, and the entitlement to that credit had been finally accepted in an earlier appellate order that had not been challenged by the Department. The later transfer of the finished equipment to a sister concern did not affect the credit already earned on the inputs used in their manufacture. The rule did not cover a situation where the unit had already shifted and the credit was allowed later pursuant to an unchallenged appellate order. Denial of the credit in those circumstances had no legal basis.

Conclusion: The denial of credit was unsustainable and the assessee was entitled to the credit.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Credit validly earned on inputs cannot be denied merely because the factory has already shifted, where the governing rule applies only to transfer of unutilized credit upon shift and the entitlement to the credit has already attained finality.

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