Modvat credit on amalgamation requires prior permission; transferee may still seek transfer before the competent authority.

Where Modvat credit is transferred on amalgamation, prior departmental permission is a substantive condition for availing the credit and cannot be treated as a mere curable procedural lapse. The transferee could not directly take the credit without compliance with the prescribed permission requirement. However, if otherwise eligible on the basis of the amalgamation, the transferee may seek transfer of the credit before the competent Central Excise authority, which must decide the request in accordance with law after hearing the assessee.

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Issues: Whether Modvat credit lying in the account of the transferor could be availed by the transferee on amalgamation without obtaining permission under Rule 57F(20) and Rule 57S(5) of the Central Excise Rules, 1944, and whether the assessee should be granted liberty to seek transfer of the credit from the competent authority.

Analysis: The transfer of ownership by amalgamation was one of the situations contemplated by the rules for transfer of Modvat credit, but the assessee admittedly did not apply for the jurisdictional Assistant Commissioner's permission. The requirement of prior permission was treated as a necessary condition under the scheme and not as a mere curable procedural lapse. At the same time, since the appellants were otherwise eligible to seek such permission on the strength of the amalgamation order, justice required that they be permitted to move the proper authority under the corresponding Cenvat provisions, and the authority was to decide the request in accordance with law after hearing them.

Conclusion: The credit could not be directly availed without compliance with the prescribed permission requirement, but the assessee was granted liberty to apply for transfer of the Modvat credit to its Cenvat account.

Final Conclusion: The lower orders were set aside only to the extent of enabling the assessee to pursue transfer of the credit before the competent Central Excise authority, leaving the authority to decide the application on merits and in accordance with law.

Ratio Decidendi: Where the rules prescribe prior departmental permission for transfer of Modvat credit on amalgamation, the requirement is a substantive condition for availing the credit, though the transferee may be allowed to seek transfer before the competent authority if otherwise eligible.

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