Modvat credit transfer on factory relocation cannot be denied by wrongly treating same-manufacturer closure as merger or amalgamation.

Unutilised Modvat credit in RG 23A may be transferred when a factory or unit is closed and its plant, machinery and materials are shifted to another site of the same manufacturer, subject to the conditions in Rule 57F(6). The transfer cannot be refused merely by treating the arrangement as a merger or amalgamation, because closure and relocation within the same manufacturer do not amount to such a corporate reorganisation. The departmental refusal on that basis was therefore unsustainable, although the actual transferable amount still requires verification against the eligible credit balance.

---

---

Issues: Whether unutilised Modvat credit in RG 23A could be transferred when one unit was closed and its plant and machinery were shifted to another unit of the same manufacturer, and whether the denial of transfer on the footing that the case involved merger or amalgamation was sustainable.

Analysis: Rule 57F(6) permitted transfer of unutilised credit on shifting of the plant or factory to another site, subject to the prescribed conditions. The two units belonged to the same manufacturer, and the closure of one unit with transfer of plant, equipment and materials to the other did not amount to merger or amalgamation of one company with another. The departmental authorities had misread the circular and trade notice and had rejected the claim on an incorrect premise. The matter nevertheless required verification of the actual credit balance and the extent to which it corresponded to eligible input credit.

Conclusion: The denial of transfer was unsustainable. The issue was decided in favour of the assessee, and the matter was remanded for fresh determination of the transferable credit in accordance with Rule 57F(6).

Ratio Decidendi: Unutilised Modvat credit is transferable on shifting of a factory or unit to another site under Rule 57F(6), and such transfer cannot be refused merely by mischaracterising the transaction as a merger or amalgamation, though the transfer remains limited to the eligible credit balance.

---