By TIOL News Service

NEW DELHI, MAY 03, 2017: THE appellant in their manufacturing unit at Nagda (MP) have two divisions, one for manufacture of Viscose Staple fiber and the second for manufacture of Excel Fiber and non-woven fabrics.

Initially, the appellant had two separate Central Excise registrations for these two divisions and as such these two divisions were maintaining separate CENVAT accounts.

In December 2011, the appellant applied for single registration and was allowed.

Consequently, the appellant merged the CENVATcredit accounts of these two divisions. The Credit balance available Rs.14,11,14,058/- in the Excel Fibre Division was used for payment of duty on all the finished products including Viscose staple fibre.

Revenue objected by taking the view that since ‘transfer' of credit is governed by Rule 10 of the CCR, 2004 and the present case is not covered under this provision, the CENVATcredit in the account of Excel Fibre Division, at the time of merger, would lapse and the same cannot be utilized for payment of duty.

SCN was issued and a demand of Rs.14,11,14,058/- was confirmed along with imposition of interest and equivalent penalty u/r 15(2) of CCR and also a penalty of Rs.5000/- u/r 27 of CER, 2002.

Aggrieved, the appellant is before the CESTAT.

The appellant justified the credit availment and utilization and relied, in particular, on the decision in Roy Electronics Vs Commissioner Of Customs, Chennai Ltd = 2008-TIOL-1412-CESTAT-MAD.

The Bench considered the submissions made by both sides and observed -

+ The Staple Fiber Division (STD) of the appellant has been operational since 1954, the EFD was subsequently established within the same premises in 2006 and took separate Central Excise Registration. However, the appellant approached the department for grant of common Central Excise Registration for both the division and the same was approved by the Department. And the EFD was considered as part of SFD.

+ With a definition of factory (as given in section 2(e) of CEA, 1944), there is no doubt that the common registration granted by the department covers the premises encompassing both SFD orEFD. … When the factory covers both SFD as well as EFD, there can be no objection to maintain a common Cenvat account and making payment of Excise Duty for any final product manufactured in the factory.

+ Rule 10 of CCR takes care of any situations such as a manufacture or shifting his factory to another site or the factories transferred on account of change in ownership on account of sale, merger, amalgamation etc. We find that the facts in the present case are different.

+ We are of the view that the decision of the Hon'ble Madras High Court(supra) - 2013-TIOL-577-HC-MAD-CX is squarely applicable to the facts of the present case. By following the above decision, we come to the conclusion that once the two divisions have a common registration certificate as a single factory, the Cenvat credit accounts, which were maintained separately will need to be merged. After such an event there can be no objection the SFD making use of the accumulated credit under EFD prior to issue of common Registration certificate.

The impugned order was set aside and appeal was allowed.

(See 2017-TIOL-1472-CESTAT-DEL)