Modvat credit transfer on factory relocation was upheld despite an earlier rule not expressly covering shifting.

Unutilised Modvat credit could be transferred to the same manufacturer's new factory site when the factory was shifted, even though Rule 57F(7) did not expressly refer to shifting. The provision was read as containing a gap because it covered transfer only on sale, merger, amalgamation or transfer to a joint venture, but not mere relocation. That omission was not treated as a valid basis to deny a substantive credit benefit, and the later wider wording in Rule 57F(20) supported that interpretation. The manufacturer was therefore entitled to carry forward and use the credit at the new site.

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Issues: Whether unutilised Modvat credit standing in the account of an erstwhile factory could be transferred to the account of the same manufacturer's new factory site when the factory was shifted, despite Rule 57F(7) not expressly mentioning such shifting.

Analysis: Rule 57F(7) as it stood during the relevant period required a change in the site of the factory to be consequential to sale, merger, amalgamation or transfer to a joint venture for transfer of unutilised input duty credit. Mere shifting of a factory from one site to another was not expressly covered. The omission was treated as a gap in the rule, and the position was also viewed in the light of the later substituted provision in Rule 57F(20), which indicated a wider treatment of transfer of credit. Denial of a substantive credit benefit merely because the earlier rule did not specifically mention shifting of factory was held to be unjustified.

Conclusion: The manufacturer was entitled to transfer and avail the unutilised input duty credit at the new factory site, and the refusal of permission was unsustainable.

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