Case Law Details
Super Auto Forge Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Introduction: In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Chennai clarified the legality of transferring accumulated CENVAT credit from an Export-Oriented Unit (EOU) to a Domestic Tariff Area (DTA) unit when transitioning from EOU status to DTA. This article explores the case of Super Auto Forge Ltd. vs. Commissioner of GST & Central Excise and the CESTAT’s verdict, providing valuable insights into the implications of this judgment.
Background of the Case: The case revolves around Super Auto Forge Ltd., which is engaged in the manufacture of pistons under Central Excise Tariff Heading 87081090. The company held a 100% EOU status until 13/3/2012, exporting goods and supplying to the Domestic Tariff Area (DTA) while paying duty. Subsequently, upon surrendering its EOU status, the company obtained an amended registration for its DTA operations. After exiting EOU status, the company attempted to carry forward the CENVAT credit accrued during its EOU phase to the DTA unit. However, the tax department contended that this credit transfer was impermissible due to the difference in the units’ status and ownership.
The Legal Framework: The case hinged on Rule 10 of the CENVAT Credit Rules 2004. Rule 10 permits the transfer of CENVAT credit from one manufacturer to another in specific situations such as factory shifts or transfers due to changes in ownership, sales, mergers, amalgamations, leases, or transfers to a joint venture. The tax department argued that since there was no change in ownership as stipulated in Rule 10, the CENVAT credit could not be transferred from the EOU unit to the DTA unit upon conversion.
CESTAT’s Ruling: CESTAT Chennai analyzed the heart of the issue, addressing whether the accumulated CENVAT credit from the EOU unit could be moved to the DTA unit following the EOU’s exit. While recognizing the distinct status of EOU and DTA units under Central Excise law, the tribunal emphasized that the accumulated credit should not be denied to either unit. The tribunal further declared that this credit belonged to the company, and the transition from EOU to DTA should not invalidate its access to these funds. To substantiate its stance, the tribunal cited the case of Tecumseh Products India Pvt. Ltd. vs. C.C., C.E. & S.T. Hyderabad IV (2016) (336) E.L.T. 685 (Tri.-Bang.) as a precedent.
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