Capital goods credit on inter-factory transfer upheld where same manufacturer retained use and no excess credit was claimed.

Credit on capital goods transferred from one factory to another unit of the same manufacturer was treated as admissible where the goods remained within the same manufacturing group and no credit was taken beyond the duty actually paid. The first unit had taken 50% Modvat credit and, on transfer, reversed only that availed credit even though full duty should have been paid on removal; the transferee unit then took the remaining 50% credit. The analysis applied Rule 57AC(2)(b) on continued use by the same manufacturer and sustained the appellate view that the credit was not excessive in relation to duty paid.

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Issues: Whether credit on capital goods shifted from one factory to another unit of the same manufacturer was admissible, despite non-payment of full duty on removal and only partial reversal of the credit originally taken.

Analysis: The capital goods were first received in one factory and 50% Modvat credit was taken. On removal to another factory of the same manufacturer, only the earlier availed 50% credit was reversed, although full duty ought to have been paid on removal under Rule 57AB(1)(b). The remaining 50% credit was later taken in the transferee unit. The credit was held admissible because the capital goods continued to remain in the use of the same manufacturer, satisfying the condition under Rule 57AC(2)(b). The appellate authority's view was also sustained because no excess credit beyond the duty paid was taken.

Conclusion: The credit was held admissible and the Department's appeal was rejected.

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