CESTAT Chandigarh Upholds Transfer Of CENVAT Credit After Shift Of Centralised Registration

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench, has recently held that transfer of unutilised CENVAT credit by a taxpayer from its Jaipur office to Gurgaon upon shifting of centralised registration is legally sustainable, in the absence of any dispute regarding the validity of such credit at the original location.

A coram of Judicial Member S.S. Garg and Technical Member P. Anjani Kumar, while rejecting the Revenue's objection to the transfer of credit, noted that the Department itself had not questioned the credit originally availed at Jaipur, observing that “the department has not disputed the CENVAT Credit availed by the Assessees at their Jaipur office. The department has also not alleged that the CENVAT Credit had already been utilized in Jaipur.”

The controversy arose when the Department challenged the transfer of CENVAT credit exceeding Rs. 171 crore by Sistema Shyam Teleservices Ltd, contending that such transfer was impermissible under Rule 10 of the CENVAT Credit Rules, 2004, as there was no transfer of business, ownership, merger, or amalgamation.

According to the Revenue, mere shifting of centralised accounting and registration from Jaipur to Gurgaon did not satisfy the statutory conditions required for the transfer of credit.

The assessee, however, argued that Rule 10 was not applicable to its case, as there was no transfer of business but only a shift in centralised billing and accounting functions for administrative convenience. It was further submitted that the credit in question had been validly availed at the Jaipur office, duly reflected in statutory returns, and had not been disputed by the Department at any stage.

The assessee emphasized that once validly earned, CENVAT credit is a vested right and cannot be denied merely due to procedural changes such as relocation of centralised registration.

Accepting the assessee's contentions, the tribunal observed that Rule 10 applies strictly to cases involving transfer or shifting of business under specified circumstances, such as change in ownership, sale, merger, or amalgamation, which were admittedly absent in the present case.

It held that the shifting of centralized registration due to a change in accounting location cannot be equated with the transfer of business.

The tribunal further noted that there was no allegation that the credit was wrongly availed or already utilised at Jaipur, and therefore, denying its transfer would be unjustified.

The bench, referring to previous cases, noted that the substantive benefit of CENVAT credit could not be disallowed on account of procedural infractions.

In view of these findings, the Tribunal concluded that the transfer of CENVAT credit was legally sustainable and upheld the order of the adjudicating authority, thereby dismissing the Revenue's appeal.

For Appellant: Advocates Gajendra Maheshwari, Priyamwada Sinha and Arnav Mehta,

For Respondent: Shyam Raj Prasad, Special Counsel