Transfer of unutilised Modvat Credit in case of merger/amalgamation of a Company with another Company - Clarification reg. - Central Excise - 1/93-CX.8

Transfer of unutilised Modvat Credit in case of merger/amalgamation of a Company with another Company - Clarification reg. Circular No. 1/93-CX.8 Dated 5-1-1993 [From F. No. 263/9/92-CX.8] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Transfer of unutilised Modvat Credit in case of merger/amalgamation of a Company with another Company - Clarification reg. During the recent Customs and Central Excise Advisory Council Meeting held on 07-11-1992, it was represented by various trade associations that at present there was no specific provision in the Modvat Rules to allow transfer of unutilised Modvat Credit balance lying in RG 23A, Part II of a Company, when it seeks to merge/amalgamate with another Company. It was represented that under present provisions the latter Company could not transfer the unutilised credit to its own books. The trade associations requested that Modvat Rules should be amended to provide for the transfer of the entire unutilised credit balance. 2. The matter has been examined. It is seen that provisions exist in Modvat Rules to allow transfer of unutilised credit balance under certain circumstances. With a view to remove any doubt in this regard and to remove any hardship to the trade, if any, it is clarified that Modvat provisions are applicable to a manufacturer factorywise. Under the existing Rules transfer of unutilised credit lying in RG-23A, Part-II is permissible under the following conditions/circumstances :- (i) Under Rule 57F (6) on an application made by a manufacturer, who has shifted his plant or factory to another site, the Collector can permit the manufacturer to transfer the unutilised credit to such factory of the same manufacturer. (ii) Under Rule 57 H, credit of duty paid on the inputs lying unutilised as well as the credit of duty paid on the inputs used in the final products lying in the factory at the time of application, can be allowed to the new manufacturer provided such credit was not availed earlier under any other rule or notification. 3. Thus, in case the factory A seeks to merge/amalgamate with factory B, the quantum of credit that can be permitted to be transferred to the books of factory B would be equivalent to the total of the credit on the inputs which are (i) lying in stock and/or (ii) in process and (iii) contained in the final products lying in the stock. This would be subject to the condition that such credit has not been availed earlier by the assessee under any other rule or notification and consequently cannot exceed the balance available in the RG 23A. This is to ensure that the assessee does not avail of the same input credit more than once. Any excess credit lying in the RG 23A of Factory A, the credit beyond what is specified above, would lapse and would not be admissible for transfer. 4. Trade and Field formations may please be informed accordingly. 5. Receipts of this Circular may please be acknowledged.