Modvat credit utilisation across integrated factory divisions upheld where separate registration changed to single registration.

Common management, same premises and integrated business activity meant that switching from separate to single registration did not amount to a transfer, merger or amalgamation for Rule 57F(12) purposes. The proviso allowed Modvat credit on duty-paid inputs to be used toward duty on any final product, where the inputs were received and used in the factory of production. As the sugar and distillery divisions were part of the same operation and the Revenue accepted admissibility to the extent of transferred molasses, the assessee could use unutilised credit against duty on sugar and the demand failed.

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Issues: Whether accumulated Modvat credit earned in the distillery division could be utilised for payment of duty on sugar after the assessee obtained a single registration certificate for both divisions, and whether such utilisation was barred on the ground of transfer or merger of units under Rule 57F(12) of the Central Excise Rules, 1944.

Analysis: The sugar unit and the distillery unit were under the same management, located in the same premises, and formed part of the same business activity. The Revenue did not dispute that the molasses arising from sugar manufacture was used in the distillery unit and that credit to the extent of the transferred molasses was admissible. On these facts, the mere shift from two registration certificates to one did not amount to a transfer, merger, or amalgamation in law so as to deny credit adjustment. The proviso to Rule 57F(12) permitted credit on duty paid inputs to be utilised towards payment of duty on any final product, subject to receipt and use of the inputs in the factory of production.

Conclusion: The assessee was entitled to utilise the unutilised Modvat credit for payment of duty on sugar, and the Revenue's demand was not sustainable.

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