Commissioner Of Central Excise, Mumbai ... vs M/S. Hindustan Lever Ltd

[Arising out of Order-in-Appeal No. SB(72) 72/MI/2009 dtd. 2/9/2009 passed by the Commissioner of Central Excise (Appeals) Mumbai]

For approval and signature:

Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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Commissioner of Central Excise, Mumbai I : Appellants

VS

M/s. Hindustan Lever Ltd. : Respondent

Appearance

Shri. Rakesh Goyal, Addl. Commissioner (A.R.) for the Appellant Mis. Padmavati Patil, Advocate for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 15/1/2015 Date of decision: 15/1/2015

ORDER NO.

Per : Ramesh Nair

This appeal of the Revenue is directed against Order-in-Appeal No. SB(72) 72/MI/2009 dtd. 2/9/2009 passed by the Commissioner of Central Excise (Appeals) Mumbai, wherein order of the original authority was set aside and the Appeal of the respondent was allowed. The issue involved in this case is that the respondent M/s. Hindustan Lever Ltd. have sold their manufacturing unit alongwith raw material and semi finished goods to M/s. Bon Ltd. on 17/7/2005, which was by way of slump sale comprising of land, building, raw materials, packing materials and work in progress stocks. On adjudication, Ld. Adjudicating authority confirmed duty demand of Rs. 33,35,648/- under the Rule12 & 14 of Cenvat Credit Rules, 2002 read with Section 11A(1) of the Central Excise Act, 1944 and also demanded equal amount of penalty and interest. The said demand was made in respect of inputs and semi finished goods transferred to the buyers of the unit i.e. M/s. Bon Ltd. on the ground that the said inputs were not used by the appellant in the manufacture of the final product and the same was removed to buyer M/s. Bond Ltd. This removal is liable to payment of Cenvat credit as if such input was cleared as such in terms of Rule 3 of Cenvat Credit Rules 2002/2004. Aggrieved by the said order the respondent filed appeal before the Commissioner(Appeals), who allowed the appeal of the respondent and set aside the order in original, therefore the Revenue is before me.

2. Shri. Rakesh Goyal, Ld. Addl. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the grounds of Appeal. He submits that in terms of Rule 3 of Cenvat Credit Rules, 2004 manufacturer availed Cenvat Credit only if the input received by them is used in the manufacture of final product, which cleared on payment of duty. He submits that respondent M/s. Hindustan Lever Ltd have not used the inputs which has gone to M/s. Bon Ltd, hence they are required to reverse the Cenvat Credit availed on such input sold as such. He placed reliance on the judgment in case of [2009(263)E.L.T.240(Kar)] CC., EX. Belgaum Vs, Associated Cement Co. Ltd., and [2004(173) E.L.T. 145 (Tri.-Del.) Majestic auto Ltd. Vs. CC Ex. Ghaziabad and [2006(201) E.L.T. 114(Tri. Del.) Steel Authority of India Ltd. Vs. CCE. Shri. Goyal, Ld. A.R. prays for setting aside the impugned order and to uphold the adjudication order.

3. On the other hand, Ms. Padmavati Patil, Ld. Counsel appearing on behalf of the respondent submits that it is undisputed fact that input on which adjudicating authority has confirmed the demand, were not removed from the factory of the manufacturer. The factory was sold alongwith stock of inputs and capital goods. The sold unit was on going unit and on the date of transfer of ownership the successor unit i.e. M/s. Bon Ltd used the said input in the manufacture of the final product and discharged the excise duty thereon. Part of the inputs were sold by the M/s. Bon Ltd on which excise duty was paid. It is her submission that though the factory was sold alongwith the inputs but appellant has not removed the input out of the factory, unless the input removed from the factory of manufacturer the demand of Cenvat credit is not correct. She referred to Rule 10 of Cenvat Credit Rules, 2004 according to which input as well as input credit is allowed to be transferred to the buyer of the factory in case of sale of the excisable unit. For this reason also the demand of Cenvat credit in respect to input lying in the factory which was sold to M/s. Bon Ltd. is unsustainable. As regard the judgment relied upon by the Revenue, she submits that judgment Majestic auto Ltd. Vs. CC Ex. Ghaziabad (supra) has been reversed by the Honble Alahabad High Court in Central Excise appeal No. 13/2005 vide order dated 30/8/2012. As regard the case of CC., EX. Belgaum Vs, Associated Cement Co. Ltd (supra) she submits that on the very same issue the Alahabad High Court in the case of Majestic auto Ltd. Vs. CC Ex. Ghaziabad held that capital goods on which modvat credit was taken remained installed in the same premises which was leased out and continue to be engaged in the manufacture, there is no removal of goods. She further submits that in the case of CC., EX. Belgaum Vs, Associated Cement Co. Ltd the provision of Rule 10 was not considered. Therefore the ratio of the CC., EX. Belgaum Vs, Associated Cement Co. Ltd case is not applicable in the present case. On the contrary, Ms. Patil relied upon the following case laws:

(a) [2001(130) E.L.T. 181(Tri. Del) Jamna Auto industries Ltd Vs. CC.Ex. Indore

(b) [2007(216) E.L.T. 217(Tri. Chennai) Bilt Industrial packaging company Ltd.Vs. CC. Ex., Salem

(c) [2005(190) E.L.T. 193(Tri-Mum) Indorama Synthetics (I) Ltd. Vs. CC. Ex. Nagpur

(d) [2004(167) E.L.T. 208(Tri.-Del) Metzeller Automotive Profiles India P. ltd. Vs. C.C.E., Ghaziabad

4. I have carefully considered the submissions made by both the sides and perused the record.

5. In the present case, the fact is not under dispute that though the manufacturing unit was sold by the appellant to M/s. Bon Ltd. but sale is on as where is basis. Accordingly, the input in question was not removed from the factory and therefore in absence of removal of input from the factory duty demand is not sustainable. It is also not disputed that the factory was on going and after sale, the buyer, M/s. Bon Ltd was engaged in the manufacture and was assessed under Central Excise. It is also not a case that M/s. Bon has removed the input lying in the factory without payment of duty or disposed of otherwise. Rule 10 of the Cenvat Credit Rules, 2004 relevant for this case is reproduced below:

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.

From the reading of the above Rule 10, it can be seen that it is permitted even to transfer the Cenvat credit to the buyer unit as well as transfer of stock of input. In this regard, the Revenue in their ground of appeal stated that since factory was partly sold therefore Rule 10 is not applicable. I do not agree with the contention of the Revenue, for the reason that there is no dispute that a manufacturing unit was sold and even manufacturing was continued after sale, there is no condition provided in Rule 10 that provision of such rule is not applicable in case where factory is partly sold. The judgments relied upon by the Ld. Counsel for the respondent are squarely applicable in the present fact of the case. As regard the judgment in the case of CC., EX. Belgaum Vs, Associated Cement Co. Ltd (supra) it has not considered the provision of Rule 10 of Cenvat Credit Rules 2004, therefore it stands distinguished. Ld. Commissioner (Appeals) in his order allowed the appeal of the respondent on following findings:-

10. I find that there are number of decisions on the issue of transfer of ownership of factory where the appellate authorities have repeatedly held that since there is no removal of goods from the factory, no duty was required to be paid. On transfer, credit availed materials are available to the buyer, who continues to be engaged in the manufacture of same goods and therefore as per statutory provisions, such assessee was not required to pay back the credit availed on inputs, they sold to the buyers. Thus, the sale of factory does not amount to removal. In this connection I find that the appellants have rightly and properly relied on the decisions in cases of (i) Jamna Auto Inds-2001(130) ELT181(T) (ii)Whirlpool India Ltd.-2003(58)RLT241(T) (iii) Metzeller Automotive Profiles-2004(167) ELT 208(T) (iv) ACC -2004(173)ELT210(T) (v) Soft Caps- 2007(215)ELT550(T) (vi) Bilt Ind Packaging 2007(216) ELT 217(T) and the decisions are also applicable in the impugned case.

11. I do not find any justification in the statements of the respondent in the impugned order that the appellants claim that M/s. Bon Ltd had paid/reversed Rs. 23,82,611/- is not relevant to this case, as M/s Bon Ltd. is neither an assessee, nor a co-noticee or  in this case, appellant claim that M/s. Bon Ltd. have reversed/paid Cenvat credit to the tune of Rs. 14,32,279/- being the proportionate credit on the stocks transferred by appellant to M/s. Bon Ltd was not acceptable since reversal of Cenvat credit is demanded/ required to be done by the appellants On sale of the factory, the legal rights and ownership passes to the buyer, and unless and until specifically provided to the contrary in the agreement to sale, the Cenvat Credit of the inputs also passes to the buyer, with the inputs in the form of raw materials or work in progress. Further, it has been contended by the appellants that the correct amount of credit attributable to inputs lying in Sewree factory on the date of slump sale was Rs. 23,82,611/- as against Rs. 33,35,648/- demanded in the show cause notice. However, since I done not find any force in the arguments of the department/respondent in principle and hold that the credit of inputs(raw material/work in progress) sold by the appellants should be available to the buyers and the same cannot be recovered from the appellants. I do not go into the specifics of the amount.

From the reading of the finding given by the Ld. Commissioner (Appeals), I do not find any infirmity in the impugned order. In view of my above observations and discussions, the impugned order requires to be upheld and I do so. The appeal of the Revenue is dismissed.

(Dictated in court)

Ramesh Nair Member (Judicial) sk

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