1997 (10) TMI 212 - AT - Central Excise

Summary

Issues:
Transfer of Modvat credit from one unit to another based on shifting operation; Interpretation of Rule 57F(6) regarding shifting of factory or merger/amalgamation; Application of trade notices on transfer of unutilised Modvat credit in case of merger or amalgamation.

Analysis:
The case involved the appellant having two units in different locations and shifting plant and machinery from one unit to another. The appellant sought transfer of unutilised Modvat credit from the former unit to the latter, which was partially allowed by the Assistant Collector but denied for the RG 23A/Pt. II account. The main contention was whether the shifting operation fell under Rule 57F(6) or constituted a merger/amalgamation.

The appellant argued that the shifting operation was covered by Rule 57F(6) as it stood at the material time. They emphasized that both units belonged to the same manufacturer, a partnership firm, and not different companies. The appellant challenged the Assistant Collector's interpretation of the situation as a merger or amalgamation, citing trade notices on transfer of credit in such cases. The respondent opposed these arguments and supported the decisions of the lower authorities.

The Tribunal noted the correspondence between the appellant and departmental officers regarding the closure of operations at one unit and the shifting to another. The Assistant Collector's decision was based on the belief that the situation was a merger/amalgamation, not covered by Rule 57F(6). The Additional Collector's advice, referencing a Ministry circular, influenced this decision. However, the Tribunal found that the authorities misinterpreted the Board's instructions on transfer of unutilised credit in merger/amalgamation cases.

The Tribunal clarified that the situation did not constitute a merger or amalgamation of different companies but involved a single manufacturer with two units. The transfer of unutilised credit was permissible under certain conditions, as outlined in the Board's instructions. The decision to disallow credit solely on the ground of not being a shifting operation was deemed incorrect. The matter was remanded to the Assistant Commissioner for reevaluation, considering the correct interpretation of Rule 57F(6) and the conditions for transferring unutilised credit. The appeal was allowed, setting aside the impugned order.