CENVAT credit transfer on amalgamation permitted where statutory conditions are met, and common registration cannot be refused.

On amalgamation of two divisions of the same manufacturer, unutilized CENVAT credit could be transferred from one division to the other where the conditions in the credit rules were satisfied. Rule 57AF permitted transfer of credit on merger, amalgamation or other transfer, and Rule 57AB(1B) allowed credit to be used for duty on final products manufactured by the assessee. A narrower view based on the separate use of inputs in each product line, or on physical separation and separate records between divisions, was inconsistent with the statutory scheme. Common central excise registration could therefore not be refused on that basis.

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Issues: Whether, on amalgamation of two divisions of the same manufacturer, CENVAT credit lying in one division could be transferred to the other division and a common central excise registration could be granted.

Analysis: Rule 57AF of the Central Excise Rules, 1944 permits transfer of unutilized CENVAT credit where a factory is shifted, sold, merged, amalgamated or otherwise transferred, subject to the specified conditions. Rule 57AB(1B) further allows utilization of CENVAT credit for payment of duty on any final products manufactured by the manufacturer. The restrictive view that credit of molasses could not be used for sugar clearances merely because molasses was not an input in sugar manufacture was inconsistent with the scheme of the rules. The divisional separation by road, gate, and separate records did not justify refusal where the statutory conditions for merger or amalgamation were satisfied.

Conclusion: The request for transfer of CENVAT credit and for a common central excise registration could not be refused; the issue is decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal succeeded on the permissibility of credit transfer and common registration upon amalgamation.

Ratio Decidendi: Where the governing credit rules expressly permit transfer of unutilized CENVAT credit on merger or amalgamation and allow its use for payment of duty on final products, the authorities cannot impose a narrower restriction not found in the rules.

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