By TIOL News Service

CHENNAI, OCT 08, 2015: THE appellants are registered with Central Excise and they have two units, namely Thavalakuppam (Unit-I) and Uruvaiyaru (Unit-II). Both the units have been manufacturing excisable goods and availing Cenvat credit for payment of duty. With effect from 01.04.2012, Rule 10A was inserted in CCR, 2004 vide Notification No. 18/2012-CE (NT) dated 17.03.2012 allowing transfer of CENVAT Credit of Additional duty of Customs among the units of the manufacturer with common PAN.

In view of insertion of Rule 10A of CCR, 2004, on 31.05.2012, Unit-II transferred their SAD credit balance of Rs.6,37,53,414/- to Unit-I under the cover of Delivery Challan (i.e. transfer challan). Show Cause Notice was issued to both the units proposing to deny irregular transfer of cenvat credit of Rs. 6,37,53,414/- from Unit-I and to recover the amount along with interest and also to impose penalty on both the units. The adjudicating authority confirmed the recovery of Rs.6,37,53,414/- along with interest and penalty of Rs.3,00,000/- on Unit-I. There is a further penalty of Rs.3,00,000/- on Unit-II. Hence the appeals.

On behalf of revenue, it was contended that the appellants have not followed the conditions prescribed under the Notification and they have transferred the last credit amount taken two years before, which is not permissible under Rule 10A of CCR.

After hearing both sides, the Tribunal held:

+ Only ground on which the credit was denied is that whether such transfer of credit can be only after 01.07.2012 i.e. at the beginning of the quarter as stipulated in the notification. Rule 10A is self-contained provision introduced for transfer of credit of AED (SAD) and it has prospective effect. Once it is came into effect from 01.04.2012, transfer of unutilized credit from one unit to other unit is automatically permissible and the Rule also specifies that such transfer should takes place at the end of the quarter, which has prospective effect and only permissible at the end of a quarter. In the present case, as seen from the records, unit-II which was defunct and the credit remained unutilized was correctly transferred on 31.05.2012, immediately after introduction of Rule on 01.04.2012, as they are eligible to transfer the same from 01.07.2012. Even though they have transferred the credit on 31.05.2012, they have not utilized the entire credit and only Rs. 2.5 Crores was utilized before 01.07.2012. The said Rule 10A came into effect from 01.04.2012 and the credit which was already accumulated and remained unutilized prior to the amendment rightly can be transferred after 01.04.2012. In view of the above, the appellants are eligible for transfer of unutilized credit from unit-II to Unit-I and the transfer of the credit done by the appellant is in conformity with the provisions of Rule 10A, which was specifically introduced only for this purpose relating transfer of unutilized credit availed on SAD (AED). The appellant is not liable for any penalty. Accordingly, the impugned order is set aside and both the appeals are allowed.

(See 2015-TIOL-2148-CESTAT-MAD)