Modvat credit on later-paid differential duty remains available when it is not linked to lapsed pre-existing credit balance.

Modvat credit could not be denied merely because the duty payment supporting the credit was made after 16-3-1995, where the inputs had been received earlier and the later duty payment was independently attributable to those inputs. Rule 57F(4A) caused unutilised credit existing on 16-3-1995 to lapse, but that lapse did not cover later-paid differential duty not correlated with any pre-existing unutilised balance. Rejection of credit on the sole ground that it was availed after 3/95 was therefore not sustainable under Rule 57E, and the appellant was entitled to the credit.

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Issues: Whether Modvat credit of differential duty paid after 16-3-1995 on inputs received before that date could be availed when unutilised credit as on 16-3-1995 had lapsed under Rule 57F(4A) of the Central Excise Rules, 1944.

Analysis: The credit claimed related to additional duty paid by the supplier on 4-11-1996, while the goods had been received prior to 16-3-1995. Rule 57F(4A) provided that unutilised credit as on 16-3-1995 stood lapsed, but the duty payment in question was made later and was supported by documents received after that date. The subsequent duty payment could not be correlated with any unutilised credit existing before 16-3-1995. The rejection of credit merely on the ground that it was availed after 3/95 was not sustainable in view of Rule 57E.

Conclusion: The appellant was entitled to the Modvat credit and the denial of credit was unsustainable.

Ratio Decidendi: Credit of duty paid after the lapse date cannot be denied where it is not a case of utilising pre-existing unutilised credit that had already lapsed, and the later duty payment is independently attributable to the inputs under the Modvat scheme.

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