Cenvat credit of transferred unit cannot be denied when all assets & liabilities transferred to Assessee

Jai Corporation Ltd. (the Appellant) is engaged in the manufacture of synthetic blended/spun yarn falling under Chapter sub heading 55095100 and 55092100 of the Central Excise Tariff Act, 1985. The Appellant had taken over a defunct unit namely Santogen Spinning Mills (the Unit) from Assets Reconstruction Company (India) Ltd (ARCIL) which was taken over under SAFARESI Act by the bankers and handed over to ARCIL. ARCIL is an Assets Reconstruction Company which is formed under the provisions of Reserve Bank of India Act, 1934.

ARCIL had taken over the Unit on June 6, 2005 and thereafter appointed various custodian-cum-agents who carried out manufacturing activity in their name without obtaining Central Excise Registration and without following any Central Excise procedure by following the Notification No.30/2004-C.E. dated July 09, 2004 as amended by Notification No.10/2005-C.E. dated March 1, 2005and

finally it sold out to the Appellant. The Appellant took fresh Central Excise Registration on December 9, 2005 to carry out manufacturing activity following the procedure of Central Excise laws.

The Appellant in his Excise Return claimed Cenvat credit of Rs. 1,57,09,460/- showing asold Cenvat credit balance transferred from the unit taken over by them.

The Department denied Cenvat credit so transferred from the Unit as wrongly availed and initiated proceedings for its recovery along with interest and penalty which was further confirmed bythe Adjudicating Authority. Being aggrieved, the Appellant filed an appeal before the Hon’ble CESTAT, Ahmedabad.

The Hon’ble CESTAT, Ahmedabad, after elaborate discussion on Rule 10 the Cenvat Credit Rules, 2004 (“the Credit Rules”) held that:

• The sale certificate issued by ARCILclearly transpires that the entire property of the Unit was handed over to the Appellant with all the encumbrances and liabilities which are known and unknown;
• The Appellant had fulfilled all the conditions of Rule 10 of the Credit Rules and procured all the assets and liabilities from ARCIL, which would include Cenvat credit balance lying in Books of account of the Unit;
• Having accepted the entire assets and liabilities together, the Appellant cannot be denied Cenvat Credit which is lying in balance as unutilized credit in the Books of account of the Unit;
• Even after surrender of registration certificate, the Appellant chose to retain Central Excise record which made it clear that they wanted to make a debit entry even after surrender of licence.

Accordingly,the Hon’ble Tribunal allowed the Cenvat credit to the Appellant, lying unutilized in the Books of account of the Unit.