2004 (7) TMI 213 - AT - Central Excise

Summary

Issues:
Transfer of unutilised Modvat credit from one factory to another factory.

Analysis:
The appellants had a factory at GIDC Kalol where they were availing Modvat credit on inputs for manufacturing PVC Battery Separator and PVC Compounds. They decided to shift the plant and machinery to another factory at village Wamaj Kadi for manufacturing Glass Fibre Battery Separators. They sought permission to transfer the unutilised Modvat credit of Rs. 65,01,687 from the Kalol factory to the Wamaj factory. The Commissioner initially rejected the transfer of Rs. 61,73,563.50 but allowed credit of Rs. 33,714.40 under Rule 57F(20). The appeal was filed against this decision.

After considering the issues, it was found that Rules 57F(20) and (21) applied at the relevant time. These rules allowed the transfer of unutilised credit on account of shifting the factory to another site, subject to conditions. The plain reading of these rules indicated that the transfer of credit required the physical transfer of stock of inputs along with the factory. The Commissioner's order placing limits on the transfer based on the physical quantum of inputs being transferred was not upheld. The rules did not require a correlation between the transfer of credit amount and the physical transfer of inputs. The cases of N.K. Chemical Industries and Orient Ceramics (P) Ltd. were cited to support the argument that the transfer rules applied to factory transfers, not just company mergers or amalgamations. The case of K.M. Sugar Mills was also referenced to emphasize that the credit balance should be transferred. Therefore, the Commissioner's order was set aside, and the appeal was allowed based on the above analysis.