Modvat credit survives a takeover where factory operations, inputs, and finished goods remain unchanged.

Modvat credit was treated as continuing where a factory's operations remained tied to the pre-takeover period and the inputs and finished goods were unchanged. The governing point was that eligibility depended on receipt and utilisation of inputs in the factory, so a mere change in ownership or management did not by itself defeat credit already determined. On that basis, denial of Modvat credit was not warranted in the takeover situation, and the reference application was rejected because no referable question of law arose.

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Issues: Whether Modvat credit could continue to be availed after a change in ownership or management of the factory, and whether any referable question of law arose on that basis.

Analysis: The facility of Modvat was treated as dependent on receipt of inputs in a factory and their utilisation. It was held that where the operations in the factory remained relatable to the period before takeover and the inputs and finished goods were the same, the eligibility already determined would continue despite a change in management. In that situation, denial of Modvat credit was not warranted. On that reasoning, no question of law was found to arise for reference.

Conclusion: The reference application was rejected, and the benefit of Modvat credit was upheld in the circumstances of the takeover.

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