Transfer of Balance Cenvat Credit on Account of Britco Foods Company to Hindustan Coca Cola Beverages Ltd is allowable on confirmation of merger: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise And Service Tax Appellate Tribunal ( CESTAT ) has held that the transfer of balance cenvat credit on account of Britco Foods Company to Hindustan Coca-Cola Beverages Ltd is allowable on confirmation of the merger.

M/s. Britco Foods Company Limited (M/s. Britco) merged with the appellant under Companies Act, 1956.  The scheme of merger was approved by the Delhi High Court on 10.09.1999. Before the order of merger, M/s. Britco has made an application dated 20.02.1998 requesting to transfer the unutilized Cenvat credit on inputs to the tune of Rs. 4,26,896/- and capital goods to the tune of Rs. 4,23,96,092 lying in the balance of their statutory records. 

After approval of the merger of M/s. Britco into appellant-Company, as ordered by Delhi High Court, the appellant on 20.10.1999 had made another application to the Commissioner of Central Excise requesting permission to transfer the unutilized Modvat credit into the appellant’s statutory records.  As the department has not taken any action regarding the transfer of unutilized modvat/Cenvat credit, the appellant filed a writ petition bearing Civil Application No. 8630/2002 in  Gujarat High Court whereunder a request was made that transfer of Cenvat credit should be allowed to their statutory accounts and interest should also be paid by the department for the delay in this regard. 

The High Court ordered the department should decide on the appellant’s application for transfer of modvat credit/ Cenvat credit, within two weeks. In view of the High Court’s order, the department vide its letter informed the appellant that the Commissioner of Central Excise has allowed the transfer of Cenvat credit on inputs to the tune of Rs. 4,08,252/- and rejected the transfer of unutilized Cenvat credit on capital goods saying the M/s. Britco had wrongly taken credit on capital goods at the stage of the initial setup of the factory and before commencing production.  

A show cause notice was served to the applicant asking them to show cause as to why the interest of Rs. 2,20,56,050/- claimed by them should not be rejected. The matter was adjudicated by the Commissioner vide order-in-original whereunder the claim of interest was rejected on the argument that there is no provision of interest under the Central Excise Act and Rules.

It was found that the interest was made payable by the department to the appellant for the delayed payment.  The only question that is there before us to decide is what the period of delay and which date is to be taken as a relevant date merger of M/s. Britco with M/s. Hindustan Coca-Cola Beverages Limited.

It was evident that the scheme of arrangement of merger between M/s. Britco Foods Company Limited (M/s. Britco) with M/s. Hindustan Coca-Cola Beverages Limited was approved by the Delhi High Court vide its order and the merger order of the High Court was conveyed by the appellant to the department vide its order. 

The Tribunal observed that the Modvat/Cenvat credit which was lying in the balance of M/s. Britco stand transferred to M/s. Hindustan Coca-Cola Beverages Limited from the date of the merger of two entities which was effected vide order dated 10.09.1999. This order was conveyed to the department on 20.10.1999 as per the record of the appellant. 

A two-member bench of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) held that the department should have allowed the transfer of Modvat/ Cenvat credit lying in RG23A and RG23C accounts of M/s. Britco Foods Company Limited to M/s. Hindustan Coca-Cola Beverages Limited on receipt of the letter of the merger of two companies. 

Shri Hardik Modh appeared for the Appellant and Shri Rajesh R. Kurup appeared for the Respondent.

To Read the full text of the Order CLICK HERE

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