By TIOL News Service

CHENNAI, JUNE 19, 2017: THE  issue 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 CCR, 2004.

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

The Tribunal while allowing the appeal held that the rule does not call for an interpretation in a pedantic manner inasmuch as absence of the word "shifted" in the said sub-rule 10(1) appears to be an inadvertence since the first part of the sentence uses the word "shifts his factory"; that law is to be interpreted in a manner to make that workable without creating any absurdity or ambiguity.

The Bench also added that to reduce litigation, the CDR needs to take up the matter with the Government for amending rule 10(1) to achieve the legislative mandate.

We reported this order as 2016-TIOL-1288-CESTAT-MAD.

Predictably, Revenue was not happy with this order and, therefore, filed an appeal before the Madras High Court.

The High Court extracted the facts involved and which are -

+ The respondent/assessee had a manufacturing unit set up at Hosur, which was closed on 31.03.2010.

+ The Hosur unit was shifted by the respondent/assessee to Bangalore.

+ The Registration Certificate qua the Hosur unit was surrendered by the respondent/assessee on 31.03.2010.

After reproducing rule 10 of the CCR, 2004, the High Court inter alia observed -

++ In sub-rule (1) of Rule 10, there is no reference to a circumstance, as in this case, where, an assessee may have relocated his business after completing the process of shifting from one place to another.

++ The word "shifts" which occurs in the first limb of Rule 10(1), will include a situation where a unit located at, say, place 'A', is shut down and thereafter, relocated to another site, say, place 'B'. We see no reason for concluding otherwise. Any other interpretation would lead to absurd results.

++ The argument (by Revenue) that transfer of cenvat credit was not permissible, under Rule 10(1) of the 2004 Rules, since, there was no reference to a relocated unit in the latter part of the provision, is, in our view, misconceived. This argument of the learned counsel proceeds on the basis that Rule 10(1) contemplates only those situations, which are exemplified by the use of the words and/or expressions, such as, "transferred", "sold", "merged", "leased" or "amalgamated" or "transfer of factory". In our view, as indicated above, this argument is flawed, for the reason, if, that was the intention of the framers of the rule, there was no need to refer to a situation, which involved an assessee shifting his factory from one site to another. That there is ruck in the rule is a given.

+ Having regard to the purpose behind the rule, which is, broadly, to enable an assessee to use un-utilisedcenvat credit, we see no difficulty in holding that an assessee will be able to transfer his un-utilisedcenvat credit, even in a situation, where he shifts his factory from one site to another.

The conclusion arrived at by the Tribunal was sustained. And the question of law was answered in favour of respondent/assessee and against the Revenue.

The Revenue appeal was dismissed.

(See 2017-TIOL-1130-HC-MAD-CX)