Proforma credit for successor concern upheld where existing permission was treated as continuing and procedural lapse was not fatal.

A successor company taking over a partnership business as a going concern may continue to claim proforma credit where the department has amended the existing licence, accepted continued manufacture, allowed transfer of stock and records, and required only a fresh bond. On these facts, the original permission for the same manufacturing activity and inputs was treated as continuing for the successor concern. The procedural requirements under the rule were therefore regarded as substantially complied with, and denial of credit solely because fresh permission was not obtained was unjustified. The successor was entitled to the credit.

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Issues: Whether the successor company could continue to avail proforma credit on the basis of the permission granted to the predecessor partnership firm, and whether non-obtaining of fresh permission by the successor company was only a technical lapse not warranting denial of credit.

Analysis: The successor company had taken over the business as a going concern along with assets and liabilities of the erstwhile partnership firm. The department had amended the existing licence, accepted the continued manufacture, permitted transfer of stock and other records, and insisted only on a fresh bond. On these facts, the permission originally granted for the same manufacturing activity and inputs was treated as continuing for the successor concern. The procedural requirements under the rule were therefore held to have been substantially complied with, and denial of credit merely for want of fresh permission was considered unjustified.

Conclusion: Denial of proforma credit on the ground of absence of fresh permission was not justified, and the assessee was entitled to the credit.

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