1992 (5) TMI 120 - AT - Central Excise

Summary

Issues:
Transfer of credit from one factory to another factory under Rule 57F(6) - Retroactive application of amendments - Jurisdiction of authorities to permit transfer of credit - Interpretation of MODVAT credit utilization rules for finished products and inputs in different factories.

Analysis:
The appeal in this case challenged the rejection of the appellants' claim for transferring credit from their first factory in Bangalore to a new factory in Nanjangud by the Collector Central Excise (Appeals), Madras. The appellants sought permission for the transfer after shifting the factory, but the authorities did not allow it despite subsequent amendments to Rule 57F(6) permitting such transfers. The appellants argued that the amendments should be considered clarificatory and relied on precedents to support their case. However, the Tribunal held that the amendment allowing credit transfer cannot be applied retroactively. The Tribunal emphasized that the accumulation of credit is crucial for discharging duty liability and cannot be transferred without specific statutory provisions. The ruling in the Indian Aluminium case, cited by the appellants, was deemed irrelevant as it pertained to procedural aspects, unlike the substantive right to transfer credit in this case. Therefore, the Tribunal upheld the impugned order and dismissed the appeal.

In a separate order by Member (T), it was observed that Rule 57F at the relevant time did not provide for the transfer of MODVAT credit between different factories. The MODVAT scheme required inputs to be used within the same factory for manufacturing finished products, and any removal of inputs from the factory necessitated duty payment. The counsel acknowledged that credit transfer between different units of the same manufacturer was not permissible under the existing rules. Each factory was considered a separate entity for Central Excise purposes, and the MODVAT credit could not be transferred between factories unless specifically allowed by the rules. Consequently, the appellant's request for credit transfer was denied based on the lack of provisions permitting such transfers under the existing rules.

These judgments highlight the importance of clear statutory provisions for transferring credit between factories under the MODVAT scheme. The Tribunal emphasized the need for explicit authorization for such transfers and rejected retroactive application of amendments. The decisions underscore the separate treatment of each factory entity under the Central Excise rules and the limitations on credit transfer between different units of the same manufacturer.