ORDER
Gowri Shankar, Member (T)
1. The application is for waiver of deposit of duty of Rs. 1,06,122.55
demanded on the ground that the assessee was not entitled to transfer the
balance lying in its modvat accounts consequence upon shifting of its
factory from its existing location at Bhavnagar and relocation at a village
30 kilometres away.
2. The credit has been denied on the ground that Sub-rule (4) of Rule
57S and Sub-rule (2) of Rule 57N permit transfer of modvat credit balance
of the duty paid on inputs and capital goods respectively only if there was a
change in the ownership or site of a factory resulting from merger,
amalgamation or transfer of joint venture. Since ownership has continued
unchanged, transfer of credit is not permissible.
3. I have heard both sides.
4. The cited sub-rules in question permit the Commissioner, on an
application made by a manufacturer, to permit, subject to conditions and
limitations, transfer of the credit lying in form 23A or 23B “on account of
change in ownership or change in the site of a factory resulting from sale,
merger, amalgamation or transfer to a joint venture …” It is prima facie
clear that if the sub-rules read as they stand, it is difficult to apply that a
change in the site of a factory as a result of sale, merger etc. A change may
take place in the ownership of a factory as a result of merger or
amalgamation etc. It is not possible prima facie to visualise a change in the
site of a factory solely as a result of sale, merger etc. of the ownership of
the factory. It appears that the intention behind these rules was to permit
the credit in two sets of cases – one where there was a change in the site of a
factory irrespective of whether there was a change in ownership, the other
where there is a change in the ownership of the factory without there being
necessarily a change in its location. As I have noted, it is difficult to
conceive of a location of a factory changing merely because its ownership
changed; again, it is difficult to say why when credit can be transferred
when the ownership of the factory changes, it should be denied merely
because the physical location of the factory has changed by a small
distance, say to the next street. I therefore waive deposit of the duty
demanded and stay its recovery. The appeal is listed for hearing on 14th
February, 2003.