Customs, Excise and Gold Tribunal - Tamil Nadu
Usha Iron And Ferro Metals Corpn. Ltd. vs C.C.E. on 9 September, 1996
Equivalent citations: 1997(90)ELT512(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. The issue in the appeal relates to the eligibility of the appellants to avail of the Modvat credit which is lying unutilised in RG 23 Part II account when the present management took over the business of the unit.
2. The learned Advocate for the appellants Shri Seetharaman has pleaded that the earlier unit was functioning under the name of Usha Rectifier Corporation (India) Ltd. The old company Usha Rectifier Corporation (India) Ltd. handed over the management of the appellant company which is known as Usha Iron and Ferro Metals Corporation Ltd. He has pleaded that the management of the company has remained under the same umbrella i.e. the old company Usha Rectifier Corporation (India) Ltd. and for Modvat purposes it could not make any difference as to how the management of a particular company is reorganised so long as the Modvat credit taken is utilised for the specified purpose in the factory in which the inputs were received. In the present case he has pleaded that there is not even a change of management nor the owners as the ownership of the factory remained in the hands of M/s Usha Rectifiers Corporation (India) Ltd. He has pleaded that this transfer of management was done by a resolution passed by the Directors of Usha Rectifiers Corporation (India) Ltd. and Usha Iron & Ferro Metals Corporation Ltd. We put it to the learned Advocate that the very fact that the Board of Directors resolutions were required for change over would show that both the companies are separate corporate bodies and therefore prima facie it could not be said that the management of the company remained in the same hands. He merely stated that Usha Rectifiers Corporation are holding the company and therefore can be deemed to be having the management control of Usha Iron & Ferro Metals Corporation Ltd. and so also of all the units which were earlier running under their name. We are afraid we are not persuaded by this argument. Once the company has been incorporated separately under the Companies Act each one has to be treated as a separate legal entity and therefore it is to be held that the-new management took over the erstwhile unit and the issue will have to be resolved in the context of that view. At this stage the learned Advocate pleaded that Modvat rules would show that the benefit of Modvat credit has been made available in respect of the goods manufactured in a particular unit and so long as the inputs brought in are used in a particular unit notwithstanding the change of ownership the benefit of Modvat credit should be continued to be made available on the same terms and basis as was available to the unit before its take over by a new management.
3. Heard the learned JDR for the Department.
4. We have considered the pleas made by both the sides. We observe that under Rule 57A the benefit of Modvat credit is available in respect of certain specified inputs which are used for specified finished products as notified under a Notification issued under Rule 57A. A declaration is required to be made by the manufacturer before the Modvat credit can be availed of. By reason of filing that declaration the starting point for availing of Modvat credit is determined. Once the inputs have been received in a particular unit the Modvat credit becomes available for utilisation in respect of the finished goods which were manufactured in that unit. Utilisation of Modvat credit under Rule 57F is related to a factory. The facility to Modvat credit therefore has to be read therefore in the context of receipt of certain inputs in a factory and the utilisation thereof in the said factory. This being the position the question that arises is that in case there is a change of management whether the credit which has been earlier taken can be continued to be available for being utilised after the new management has taken over. In our view so long as the operations carried out in the factory are relatable to the events before its take over i.e. the goods manufactured and inputs brought in are the same, the eligibility which had already been determined continues. In the above view of the matter we hold that inasmuch as the appellants were manufacturing the same specified finished goods and the Modvat credit sought to be utilised is in respect of the same goods there could be no bar for the reason of the change of the management in the way of the appellants utilising the credit which has been already taken. We in this view of the matter hold that the appellants are eligible to the benefit of Modvat credit. The appeal is therefore allowed.