By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether, accumulated CENVAT Credit of one unit can be utilised for discharging duty liability of another unit, if both the units in fact constitute single factory and had erroneously obtained two different registration certificates in the past? Held, yes.
Facts:
The assessee, a manufacturer in sugar was running two units viz. the sugar unit and the distillery unit situated in the same premises adjacent to each other. The assessee had obtained separate registration certificates in respect of both the units, although both units are under one management. The by-products arising on the manufacture of sugar in the sugar unit, namely, molasses was again used by the assessee in the manufacture of Ethyl Alcohol in the distillery unit. The assessee cleared molasses on payment of duty and availed credit of the same for the distillery unit for payment of duty on the dutiable Ethyl Alcohol. Over a period of time, there was huge accumulation of credit in the distillery unit and the same remained unutilised. Thereafter, the assessee requested the department to grant a single registration in respect of both the units and on getting the same, it sought to utilise the unutilised credit in respect of the distillery unit against the duty payable on the manufactured sugar.
The department denied credit on the ground that, there is no provision for transfer of unutilised CENVAT Credit of one registered unit to another registered unit. It further denied the CENVAT benefit on the grounds that credit of duty paid against molasses cannot be utilised for payment of duty paid against sugar since sugar was not manufactured in the distillery unit.
Held:
The High Court observed that, (i) the sugar unit and the distillery unit belonged to the self-same management and they are in the same premises. (ii) the resultant molasses from the manufacture of sugar on which duty was paid and credit was claimed was used by the assessee in the manufacture of denatured Ethyl Alcohol which is a dutiable product. (iii) although in respect of two activities, it had maintained two accounts, yet, it related to the business of the same assessee in respect of two activities, which are interconnected too. In the circumstances the High Court held that, the mere taking of a single registration as against the two registrations, would not imply that there was a merger or amalgamation or transfer to hold that the assessee would not be entitled to any credit adjustment on the duty payable on the sugar manufactured. Both before and after the so called transfer, the same management continued to be in charge of both the units and hence the alleged credit is available. The High court further observed that the credit of duty allowed in respect of any input be utilised towards the payment of duty on any other final product, is available irrespective of whether such inputs have been used actually in the manufacture of such a final product. The only condition is that the inputs should have been received and used in the factory. Hence, the revenues appeal was dismissed.
