By TIOL News Service

CHENNAI, MAY 31, 2016: THE issue involved in the appeal is whether unutilized CENVAT credit lying in the account prior to the shifting of appellant's unit from Hosur to Bangalore is allowed in terms of Rule 10 of the CENVAT Credit Rules, 2004

Revenue denied the credit on the ground that Rule 10 of the CENVAT Credit Rules, 2004 does not permit a shifting unit which closes its business to claim unutilized CENVAT credit consequent upon shifting. According to Revenue, credit can be carried forward by a unit only in the event of amalgamation or merger.

After hearing both sides, the Tribunal held:

++ It appears that in absence of the word “shifted” in the last part of the sentence appearing in Rule 10(1) CENVAT credit Rules, 2004 Revenue denies similar status to the shifted factory as that has been granted to sold, merged, leased or amalgamated cases. However, absence of the word “shifted” in the said sub-rule appears to be an inadvertence which does not lead to construe the provision therein to be denial proposition of law to grant the benefit of unutilized credit to a shifted factory. When the legislature has used the word “shifts” in the first part of the sentence in Rule 10(1), the word “shifted” may be construed to be a necessary implication thereof for the purpose of that rule in absence of any specific denial intention. Therefore, the said such Rule does not call for an interpretation in a pedantic manner.

++ It is well settled that law is to be interpreted in a manner to make that workable without creating any absurdity or ambiguity. Therefore, a shifted unit if dealt discriminately under Rule 10(1) of CENVAT credit Rules, 2004, use of the word “shifts” in the beginning part of the said sub-rule shall be otiose.

++ To reduce litigation, the CDR may take up the matter with the Government for appropriate legislative measure in sub-rule (1) of Rule 10 of CENVAT Credit Rules, 2004 to achieve the legislative mandate of shifting of a factory for any internal, external or statutory reasons.

(See 2016-TIOL-1288-CESTAT-MAD)