Modvat credit remains allowable when one manufacturer uses inputs in the same factory despite separate excise registrations.

Modvat credit on duty-paid inputs was held admissible where one manufacturer operated two production lines in the same factory, even though the units had separate excise registrations. The record showed only one juridical person, and the synthetic yarn facility was not a separate legal entity. Because Rule 57AB allowed credit on inputs received in the factory, the separate registrations did not change the underlying character of the manufacturer or the factory. The denial of credit on the footing of separate entities was unsustainable, and the credit was restored.

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Issues: Whether Modvat credit on duty paid inputs was admissible when the appellant had one legal entity and one factory with two lines of production, notwithstanding separate excise registrations for the units.

Analysis: The record showed that there was only one juridical person, and the synthetic yarn facility was not a separate legal entity. Both production lines were situated in the same factory and the generators used the input to supply electricity to both lines. Rule 57AB permitted credit to a manufacturer on inputs received in the factory, and separate excise registrations did not alter the underlying legal character of the manufacturer or the factory. The authorities were therefore in treating the units as separate entities and in denying credit on that basis.

Conclusion: The credit was admissible and the denial of Modvat credit was unsustainable, in favour of the assessee.

Final Conclusion: The appeal was allowed and the appellant was entitled to restoration of the credit amount in cash.

Ratio Decidendi: Separate excise registrations do not by themselves create separate legal entities or separate factories where there is one manufacturer operating from the same factory premises, and Modvat credit remains allowable on inputs used in that factory.

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