Case Law Details
Lakshmi Machine Works Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The issue to be decided is whether the rejection of the request to transfer the cenvat credit balance to the lessee unit is legal and proper. The provision under Rule 10 has already been noticed above. The Department has referred to the agreement between the parties to deny the permission to transfer the cenvat credit, with the reason that there is no express stipulation for transfer of all liabilities of the appellant-company to the lessee unit. On perusal of the agreement, we find that there is a clear intention between the parties to transfer the ownership of the machinery belonging to the appellant unit to the lessee unit. Such transfer is done along with transfer of raw materials, components, capital goods etc. which indicates that the lessee unit is put into the shoes of a manufacturer in the place of the appellant-company. The agreement has to be construed as to what is the intention of the parties who have entered into agreement and not by word to word analysis. On going through the entire agreement, it is clear that there is consensus ad idem to transfer the ownership along with assets and liabilities to the lessee unit.
After appreciating the facts and evidences we are of the considered opinion that the rejection of the request to transfer cenvat credit balance as per Rule 10 of CCR 2004 is without any legal or factual basis. The Department is directed to issue permission to the appellant unit to transfer credit to the lessee unit. The appeal is allowed with consequential relief, if any, as per law.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The appellants were engaged in the manufacture of textile machinery and its parts. They decided to transfer the ownership of their unit to M/s.GKD ITR, Tooling Central Unit-II. Consequent to their transfer of ownership, the appellant applied for permission to transfer the entire unutilised cenvat credit to the newly transferred unit. However, the department vide letter dated 21.08.2012 informed the appellant that the permission sought for to transfer the cenvat credit is denied. On appeal, the Commissioner (Appeals) upheld the view of original authority. Aggrieved by the order of Commissioner (Appeals), the appellant has preferred this appeal before the Tribunal.
2. Ld. Counsel Shri T. Ramesh appeared and argued for the appellant. Ld. Counsel opened his arguments by adverting to Rule 10 of Cenvat Credit Rules, 2004 which reads as under :
“RULE 10. Transfer of CENVAT credit. – (1) If a manufacturer of the final products shifts his factory to another site or the factory is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the factory to a joint venture with the specific provision for transfer of liabilities of such factory, then, the manufacturer shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated factory.
(2) If a provider of output service shifts or transfers his business on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the business to a joint venture with the specific provision for transfer of liabilities of such business, then, the provider of output service shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated business.
(3) The transfer of the CENVAT credit under sub-rules (1) and (2) shall be allowed only if the stock of inputs as such or in process, or the capital goods is also transferred along with the factory or business premises to the new site or ownership and the inputs, or capital goods, on which credit has been availed of are duly accounted for to the satisfaction of the Deputy Commissioner of Central Excise or, as the case may be, the Assistant Commissioner of Central Excise.”
3. It is submitted by the Ld. Counsel that appellant had transferred all the raw materials, components, capital goods to the lessee unit. They had also entered into an agreement for such transfer by way of lease. By way of the lease agreement, lessee unit intended to undertake the manufacture of the goods produced using the machinery. The department has merely denied to transfer the cenvat credit lying in the account balance of the appellant-company stating that there is no express stipulation in the agreement to transfer the liabilities of the appellant company. In fact, when the raw materials, components, capital goods and the entire facility to manufacture has been transferred to lessee unit, department ought to have granted permission to transfer the balance cenvat credit also. It is not disputed by the department that after such transfer, the lessee unit is manufacturing the product and paying excise duty as applicable under law. This being the case, the Department ought not to have rejected the request for transfer of cenvat credit on technical grounds.
3. A.R Shri S. Balakumar supported the findings in the impugned order.
4. heard both sides.
5. The issue to be decided is whether the rejection of the request to transfer the cenvat credit balance to the lessee unit is legal and proper. The provision under Rule 10 has already been noticed above. The Department has referred to the agreement between the parties to deny the permission to transfer the cenvat credit, with the reason that there is no express stipulation for transfer of all liabilities of the appellant-company to the lessee unit. On perusal of the agreement, we find that there is a clear intention between the parties to transfer the ownership of the machinery belonging to the appellant unit to the lessee unit. Such transfer is done along with transfer of raw materials, components, capital goods etc. which indicates that the lessee unit is put into the shoes of a manufacturer in the place of the appellant-company. The agreement has to be construed as to what is the intention of the parties who have entered into agreement and not by word to word analysis. On going through the entire agreement, it is clear that there is consensus ad idem to transfer the ownership along with assets and liabilities to the lessee unit.
6. After appreciating the facts and evidences we are of the considered opinion that the rejection of the request to transfer cenvat credit balance as per Rule 10 of CCR 2004 is without any legal or factual basis. The Department is directed to issue permission to the appellant unit to transfer credit to the lessee unit. The appeal is allowed with consequential relief, if any, as per law.
(dictated and pronounced in the open court)
