Amalgamated Company would be eligible to avail the Cenvat Credit lying in the books of Amalgamating Company when all the facts were intimated to the Department, even though it isn’t in the prescribed form

IPF Vikram India Ltd. Vs. Commissioner of Central Excise, Ludhiana [(2014) 47 362 (New Delhi – CESTAT)]

Amar Polyfab P. Ltd. (“the Amalgamating Company or the Appellant”) merged with Indra Polyfab Pvt. Ltd. (“the Amalgamated Company”) by the Order of the Hon’ble Punjab and Haryana High Court. The Amalgamating company had unutilized Cenvat Credit Rs. 6,35,398/- at the time of merger. Such amalgamation was intimated to the Superintendent of Central Excise vide letter dated August 10, 1994 requesting for sanction, approval and amendment of the original registration certificate. The same was effected by the letter dated October 12, 1994.

Further, on October 14, 1994, the Appellant wrote another letter to the Assistant Collector, Central Excise requesting them that Modvat declaration, classification list price declarations and other documents filed by the Amalgamating Company before the merger, may be treated as that of the Amalgamated Company w.e.f. October 12, 1994.

The Appellant, however, did not file declaration under erstwhile        Rule 57H of Central Excise Valuation Rules, 1975 (“the Valuation Rules”).The Amalgamated Company subsequent to the merger utilized the aforesaid Modvat credit to the tune of Rs. 6,35,398/- against the Central Excise duty payable by them for their finished goods.

The Department contended that the Amalgamated Company wasn’t eligible to suo moto utilise the Cenvat credit of the Amalgamating Company in absence of declaration under Rule 57H and approval by the competent authority.

The Appellant contested the show cause notice and argued that failure to file declaration under Rule 57H and seeking approval for utilization was only a technical lapse for demand raised and       show cause notice was not sustainable.

The Adjudicating Authority confirmed the demand of Rs. 6,35,398/- and also imposed penalty of Rs. 5 lakhs on the Appellant.

Further, the first Appellate Authority upheld the order of the demand of Rs. 6,35,398/- but penalty was reduced to Rs. 1 lakh.

The Appellant filed an appeal before the Hon’ble CESTAT, New Delhi.

The Hon’ble CESTAT after considering the facts and circumstances of the case noted that this is the case of technical lapse. The Appellant had promptly intimated to the Department about merger and also obtained the amended registration certificate and further provided the relevant information to the Department vide letter dated October 14, 1994. Though above noted information wasn’t in the prescribed Form under Rule 57H but the Appellant supplied all necessary information to the Department.

The Hon’ble CESTAT relied upon the finding of the Hon’ble Madras High Court in the case of Chemicals & Plastics India Ltd. [1993 (68) ELT 728 (Mad.)] and held that the Appellant can’t be penalized for the technical lapse. Accordingly, the demand of Rs. 6,35,398/- as well as penalty were set aside.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email:

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October 2020