2005 (1) TMI 474 - AT - Central Excise

Summary

Issues:
Transfer of Modvat credits without permission under Rule 57F(20) and 57S(5) of Central Excise Rules, 1944.

Analysis:
The case involved M/s. PLR Industries Ltd., which had Modvat credits on capital goods and inputs. These credits were transferred to M/s. PLR Textiles Ltd. under a High Court's amalgamation order. The key issue was whether the transferee could avail these credits without permission from the Assistant Commissioner as required by Rule 57F(20) and 57S(5) of the Central Excise Rules, 1944. Both lower authorities had ruled against the appellants, leading to this appeal.

The Consultant for the appellants argued that since the Central Excise Registration was transferred to PLR Textiles Ltd. and the right to avail Modvat Credit was part of the assets transferred under the amalgamation order, the credits could be availed without prior permission. The Consultant contended that the failure to obtain permission was a minor procedural lapse that should not impede the substantive right to avail the credits.

On the other hand, the JDR representing the Revenue emphasized that obtaining the Assistant Commissioner's permission was a substantive pre-condition for the transfer of Modvat credits, as stipulated by the rules. It was pointed out that similar provisions exist in the present CENVAT Rules.

Upon review, the Tribunal noted that the appellants had not applied to the Assistant Commissioner for the transfer of the credits as required by Rule 57F(20) and 57S(5). The Tribunal found that the transfer of ownership through amalgamation was a necessary condition for transferring the credits, and the failure to fulfill the requirements of the rules was not a condonable lapse. However, recognizing the appellants' eligibility to apply for permission and the existence of analogous provisions in the present CENVAT Rules, the Tribunal allowed the appeal. The Tribunal granted the appellants the liberty to apply to the proper officer of Central Excise for the transfer of the Modvat credits to their Cenvat account. Any such application was to be processed in accordance with the law after providing the appellants with a fair opportunity to be heard.

In conclusion, the Tribunal set aside the lower authorities' orders and granted the appellants the opportunity to seek the transfer of Modvat credits to their account by applying to the competent authority, ensuring a fair hearing and compliance with the law.