Modvat credit transfer after takeover upheld where manufacturing activity and inputs remained unchanged and department stayed silent.

Modvat credit lying in the transferor company's account may be transferred to the transferee after takeover where the manufacturing activity and inputs remain unchanged, because entitlement continues on the same factual matrix. If the assessee seeks permission in advance, responds to departmental queries, and the department neither grants nor refuses permission within a reasonable time, the transfer cannot be denied on a purely technical objection. On those facts, the transfer was treated as proper and the associated demand and penalty did not survive.

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Issues: Whether Modvat credit lying unutilized in the name of the transferor company could be transferred to the appellant after takeover of the company, and whether the absence of an express response from the department despite a prior request for permission justified the transfer.

Analysis: The transferor and transferee continued the same manufacturing activity, and the goods and inputs remained the same after takeover. The entitlement to Modvat credit therefore continued on the same factual matrix. The appellant had sought permission in advance and had also responded to departmental queries, but the authorities neither granted nor refused permission for a long period. In such circumstances, the appellant could not be faulted for effecting the transfer after waiting for a reasonable time, and the silence of the department was treated as equivalent to permission.

Conclusion: The transfer of Modvat credit was held to be proper, and the demand and penalty did not survive.

Ratio Decidendi: Where the manufacturing activity and the inputs remain unchanged after takeover, and the assessee has sought permission in advance but the department fails to respond within a reasonable time, transfer of Modvat credit cannot be denied on a purely technical ground.

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