2004 (3) TMI 516 - AT - Central Excise

Summary

Issues:
Transfer of machinery between units of a company; Availability of credit under Rule 57S for transferred machinery from one unit to another.

Analysis:
The case involved M/s. Suryavanshi Spinning Mills Ltd., which had three textile units, with one being converted into an Export Oriented Unit (EOU) in June 1995. The company sought permission to transfer two machinery items from the original unit to another unit in a different state. The issue arose when the credit taken for these machines at the original unit was reversed and sought at the receiving unit, leading to a dispute regarding the eligibility of credit under Modvat Credit rules for transferred machinery.

Upon review, it was argued by the appellant that the authorities erred in treating the transfer as a sale by an EOU. The appellant contended that it was a mere transfer of machinery between units, making the credit rightfully available. Reference was made to Rule 57S(5), which allows credit on transferred machinery, supporting the appellant's position.

After examining the records and submissions, the tribunal noted that Rule 57S indeed permits credit transfer due to various reasons, including shifting of a factory or change in ownership. In this case, since the unit was converted into an EOU, the duty-paid machinery transfer to another unit made the credit available to the appellant. Therefore, the tribunal found the disallowance of credit to be incorrect. Consequently, the appeal was allowed, the impugned orders were set aside, and the appellant was entitled to the restoration of credit for the transferred machinery.