Modvat credit transfer on factory shift through job work supported waiver of pre-deposit and stay of recovery.

Rule 57F(21) on transfer of unutilized Modvat credit was examined in the context of a factory shift after fire, where inputs had been sent for job work and the processed goods were received at the new registered premises. A prima facie view was taken that the semi-processed stock had effectively moved to the new unit through the job workers, and that a rigid literal reading of the rule could defeat credit entitlement where no physical stock remained at the old site. On that basis, waiver of pre-deposit and stay of recovery were granted.

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Issues: Whether, for purposes of waiver of pre-deposit, the appellant was entitled to transfer unutilized Modvat credit under Rule 57F(20) and Rule 57F(21) when the original factory had shifted and the processed inputs were received at the new premises through job workers.

Analysis: The application arose from a dispute over the scope of Rule 57F(21), which required transfer of stock of inputs along with the factory to the new site. The appellant had sent inputs for job work under Rule 57F, debited duty thereon, and after the original premises were destroyed by fire, shifted to a new registered premises. The processed goods were received at the new unit and credit was sought to be taken back. On a prima facie view, the semi-processed stock had effectively moved from the old unit to the new unit through the job workers' premises, and a rigid literal reading of the sub-rule would create an unintended hardship where credit exists but no physical stock of inputs remains at the old site.

Outcome: Waiver of pre-deposit and stay of recovery were granted.

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