Modvat credit on stock and work-in-progress must be tested under the proviso before denial, with facts verified.

Rule 57F(17)(b) allowed lapse of unutilised Modvat credit, but its proviso preserved credit relatable to inputs lying in stock, inputs contained in finished goods, or goods in process as on 1-3-1997. The appellate authority was required to apply that proviso and consider the relevant Trade Notice issued under Board instructions before denying credit. Because the appellant's factual assertions on stock and work-in-progress needed verification, denial of Modvat credit without examining the proviso and the supporting facts was unsustainable. The matter therefore required fresh consideration and verification of the Modvat claim in accordance with the proviso and administrative instructions.

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Issues: Whether Modvat credit relating to inputs lying in stock, contained in finished goods, or in goods in process of manufacture as on 1-3-1997 could be denied by ignoring the proviso to Rule 57F(17) and the relevant Trade Notice, and whether the matter required remand for verification.

Analysis: Rule 57F(17)(b) provided for lapse of unutilised credit, but its proviso carved out credit relatable to inputs lying in stock or contained in finished products lying in stock on 1-3-1997. The appellate authority failed to consider this proviso and also did not examine the Trade Notice issued on the basis of Board instructions governing allowance of credit in such circumstances. Since the factual details furnished by the appellant regarding inputs and finished goods required verification by the adjudicating authority, the denial of credit without examining the proviso and the supporting factual position was unsustainable.

Conclusion: The denial of Modvat credit could not be sustained, and the matter had to be sent back for fresh consideration and verification.

Final Conclusion: The appellant obtained setting aside of the impugned order with a remand for reconsideration of the Modvat claim in accordance with the proviso and the relevant administrative instructions.

Ratio Decidendi: Where a statutory proviso preserves credit on inputs or finished goods in stock, the authority must apply that proviso and verify the underlying facts before denying Modvat credit.

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