MODVAT credit on factory amalgamation is transferable only within the stock-linked balance and subject to Board clarification.

On merger or amalgamation of factories, MODVAT credit could be transferred only to the extent relatable to inputs in stock, inputs in process, and final products in stock, provided the credit had not been availed earlier and did not exceed the RG 23A balance. The Madras High Court noted that the parties accepted the effect of the Board's clarification, so no elaborate adjudication was required. It set aside the impugned proceedings and left it open to the respondents to issue fresh orders, if necessary, in accordance with that clarification.

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Issues: Whether the impugned proceedings relating to transfer of MODVAT credit on merger or amalgamation of factories were liable to be set aside in light of the Central Board's clarification, and whether fresh orders could be passed accordingly.

Analysis: The Board's clarification stated that, on merger or amalgamation of one factory with another, only the credit relatable to inputs lying in stock, inputs in process, and final products in stock could be transferred, subject to the condition that such credit had not been availed earlier and did not exceed the balance in RG 23A. The parties accepted that, in view of this clarification, no elaborate adjudication was necessary. The Court therefore set aside the impugned proceedings and left it open to the respondents to pass fresh orders, if necessary, in accordance with the clarification.

Conclusion: The impugned proceedings were set aside and the writ petitions were allowed.

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