CX - CENVAT - Slump sale of on-going factory along with raw materials, packing materials - no cause for reversal of CENVAT credit on inputs as there is no 'removal' from factory - Revenue appeal dismissed: CESTAT
By TIOL News Service
MUMBAI, MAY 28, 2015: THIS is a Revenue appeal.
The respondent sold their manufacturing unit alongwith raw material and semi-finished goods to M/s. Bon Ltd., which was by way of slump sale comprising of land, building, raw materials, packing materials and work in progress stocks.
The jurisdictional authorities issued a demand notice for recovery of CENVAT credit of Rs.33,35,648/- on the ground that inputs and semi-finished goods transferred to the buyers of the unit i.e. M/s. Bon Ltd. were not used by the appellant in the manufacture of the final product; that such removal "as such" is liable for payment of Cenvat credit taken, in terms of Rule 3 of CCR, 2002/2004.
The order of the adjudicating authority was set aside by the Commissioner(A) and, therefore, Revenue is before the CESTAT.
The AR reiterated the grounds of appeal and also cited decisions in Associated Cement Co. Ltd. - 2007-TIOL-802-HC-KAR-CUS, Steel Authority of India Ltd. - 2006-TIOL-704-CESTAT-DEL in support.
The respondent submitted that the inputs were not removed from the factory of the manufacturer; factory was sold alongwith stock of inputs and capital goods; sold unit was an on-going unit and on the date of transfer of ownership the successor unit i.e. M/s. Bon Ltd. used the said input in the manufacture of the final product and discharged the excise duty thereon; part of the inputs were sold by the M/s. Bon Ltd on which excise duty was paid; appellant has not removed the inputs out of the factory and unless the input is removed from the factory of manufacturer the demand of Cenvat credit is not correct; Rule 10 of CCR allows input credit to be transferred to the buyer of the factory in case of sale. The case laws cited by the AR were countered with the following case laws viz. Bilt Industrial Packaging Company Ltd. - 2007-TIOL-1789-CESTAT-MAD & Indorama Synthetics (I) Ltd. - 2005-TIOL-630-CESTAT-MUM.
The Bench inter alia observed -
+ The fact is not under dispute that though the manufacturing unit was sold by the appellant to M/s. Bon Ltd. but sale is on as is where is basis. Accordingly, the input in question was not removed from the factory and, therefore, in absence of removal of input from the factory duty demand is not sustainable. It is also not disputed that the factory was on-going and after sale, the buyer, M/s. Bon Ltd was engaged in the manufacture and was assessed under Central Excise. It is also not a case that M/s. Bon has removed the input lying in the factory without payment of duty or disposed of otherwise.
After extracting the contents of Rule 10 of the CCR, 2004, the Tribunal further observed -
+ From the reading of the above Rule 10, it can be seen that it is permitted even to transfer the Cenvat credit to the buyer unit as well as transfer of stock of input. In this regard, the Revenue in their ground of appeal stated that since factory was partly sold therefore Rule 10 is not applicable. I do not agree with the contention of the Revenue, for the reason that there is no dispute that a manufacturing unit was sold and even manufacturing was continued after sale, there is no condition provided in Rule 10 that provision of such rules is not applicable in case where factory is partly sold.
+ The judgments relied upon by the Ld. Counsel for the respondent are squarely applicable in the present fact of the case. As regards the judgment in the case of CC., EX. Belgaum Vs, Associated Cement Co. Ltd (supra) it has not considered the provision of Rule 10 of Cenvat Credit Rules 2004, therefore it stands distinguished.
The finding of the Commissioner (Appeals) was extracted and it was held that there is no infirmity in the order.
The order-in-appeal was upheld and the Revenue appeal was dismissed.
(See 2015-TIOL-966-CESTAT-MUM)
