NO SPECIFIC STIPULATION CONTAINED IN RULE 10 OF THE CENVAT CREDIT RULES, 2004 REGARDING PRIOR PERMISSION FROM THE STATUTORY AUTHORITIES FOR TRANSFERRING THE CENVAT CREDIT AS A RESULT OF AMALGAMATION/MERGER: CESTAT
A. Brief Facts of the Case:
A.1 In this case, the Appellant (viz. “M/s. S.C. Johnson Products Pvt. Ltd.” formerly known as “M/s. Karamchand Appliances Pvt. Ltd.”) is a manufacturer of insecticides & Electro thermic Appliances falling under Chapters 38 & 35 respectively of the First Schedule to the Central Excise Tariff Act, 1985.
A.2 The appellant acquired 50% of the equity shares of M/s. Karamchand Appliances Pvt. Ltd. on 21.03.2003 and remaining 50% on 12.05.2005.
A.3 The scheme of amalgamation of the Companies was approved by the Hon’ble Delhi High Court vide Order dated 09.10.2006, stating therein that the effective date of transfer would be from 01.06.2005.
A.4 Thereafter, the Appellant got the Certificate of registration from the Registrar of Companies under the Companies Act, 1956 on 23.11.2006. The appellant also got itself registered with the Central Excise Department on 24.01.2007, pursuant to the application made by it on 28.12.2006.
A.5 During the course of verification of the records, the Department detected that as on 12.05.2005, the Appellant was having Cenvat Credit balance of Rs. 31,12,929/- lying un-utilised in its Cenvat Account in relation to input/input service, which were utilised for payment of duty on goods manufactured/cleared on or after 12.05.2005.
A.6 Utilisation of Cenvat Credit was objected by the Department, on the ground that such Credit was required to be transferred to the Appellant and thereafter to be utilised only after being allowed by the concerned Central Excise Officer in terms of sub-rule (3) of Rule 10 of the Cenvat Credit Rules, 2004.
A.7 The show cause proceedings initiated by the Department culminated in the adjudication order dated 30.08.2011, wherein Cenvat Credit of Rs. 31,12,929/- was disallowed and equal amount of penalty was imposed on the appellant under Rule 15 of the Cenvat Credit Rules, 2004 read with section 11AC of the Central Excise Act, 1944. Besides, a penalty of Rs. 10,000/- was also imposed on the appellant under Rule 25 of the Central Excise Rules, 2002.
A.8 In appeal against the said adjudication order, the ld. Commissioner (Appeals) vide its order upheld the adjudged demand excepting in reducing the quantum of equal penalty to Rs. 5,00,000/-. Hence, Appellant preferred an Appeal before the Hon’ble Tribunal.
B. Judgment of the Hon’ble Tribunal:
B.1 After hearing both sides and after perusal of the available records, Hon’ble Tribunal observed that the Hon’ble High Court has specifically approved the effective date of transfer of ownership as 01.06.2005. Thus, the date when mere share holdings were transferred, should not be considered as the effective date for the purpose of transfer of Cenvat Credit.
B.2 Further, the Tribunal held that on perusal of Rule 10 of the Cenvat Credit Rules, 2004, it reveals that there is no specific stipulation contained therein that prior permission is required from the statutory authorities for transferring the Cenvat Credit as a result of amalgamation/merger. In absence of any specific prohibition contained in the statute book, denial of Cenvat Credit on this ground by the authorities below is not legally sustainable.
B.3 Consequently, Hon’ble Tribunal set aside the impugned order passed by the Commissioner (Appeals) and allowed the Appeal in favour of the Appellant.
[M/s. S.C. Johnson Products (P) Ltd. v. C.C.E., Chandigarh in Excise Appeal No.E/57991/2013-EX (SM)]
Date of Judgment: February 22, 2016