Modvat credit on inputs in a common factory cannot be denied where separate registrations do not create separate manufacturers.

Modvat credit could not be denied merely because different production lines were separately registered under central excise where the record showed only one juridical person and one factory. The yarn unit had no separate legal status, both lines operated in the same factory, and electricity was supplied by common generators to both. On those facts, the legal position remained that there was one manufacturer and one factory, so credit on duty-paid inputs received in that factory was admissible.

---

---

Issues: Whether the appellant and its yarn-manufacturing unit were separate entities for the purpose of denying modvat credit, and whether credit on inputs received in the common factory was admissible.

Analysis: The record showed that there was only one juridical person, namely the appellant company, and no separate legal standing for the yarn unit. Both lines of production were situated in the same factory and the generators supplied electricity to both. The rule governing credit permitted a manufacturer to take credit of duty paid on inputs received in the factory. On these facts, the existence of separate excise registrations did not alter the legal position that there was one manufacturer and one factory.

Conclusion: The finding that the two units were separate entities could not be sustained, and the modvat credit was admissible in favour of the assessee.

Ratio Decidendi: Where there is only one manufacturer and one factory, credit of duty paid on inputs received in that factory cannot be denied merely because different lines of production were separately registered under central excise.

---