2005 (5) TMI 364 - AT - Central Excise

Summary

Issues:
Transfer of unutilised Modvat credit on inputs due to factory shift under Rule 57F(7) of Central Excise Rules, 1944.

Analysis:
The appellants sought to transfer their unutilised Modvat credit on inputs from their Coimbatore factory to the Pollachi factory under Rule 57F(7) of the Central Excise Rules, 1944. The Assistant Commissioner rejected the application, stating that the rule did not allow such a transfer for a mere shift of the factory. The Commissioner (Appeals) upheld this decision, leading to the present appeal. The key question was whether Rule 57F(7) mandated that a change in the factory site must be linked to specific events like sale, merger, amalgamation, or transfer to a joint venture for credit transfer. The rule did not explicitly permit credit transfer for a simple factory shift, creating ambiguity. The judge noted that denying a manufacturer the benefit of transferring input duty credit due to a factory shift based on a technicality was unjust. Referring to a stay order from a different case, the judge highlighted that substantive benefits like Modvat credit should not be denied due to legal gaps.

The Chartered Accountant representing the appellants argued that although Rule 57F(7) did not explicitly allow credit transfer for a factory shift during a specific period, the subsequent Rule 57F(20) provided comprehensive provisions for such transfers. The judge agreed that the absence of a clear provision during the relevant period could be seen as an oversight by the Rule-making authority. The judge emphasized that it would be against judicial conscience to deprive a manufacturer of input duty credit when shifting a factory to a new location. Ultimately, the judge set aside the lower authorities' decisions and allowed the appeal, recognizing the appellants' right to transfer their unutilised input duty credit to the Pollachi factory despite the absence of explicit provisions during the factory shift period.

In conclusion, the judgment highlighted the importance of ensuring substantive benefits like Modvat credit are not denied to manufacturers due to technicalities or legal gaps. It emphasized the need to interpret rules in a manner that upholds fairness and justice, allowing manufacturers to transfer unutilised input duty credit when shifting factories without unnecessary hindrances.