Modvat credit can be used without one-to-one correlation when Rule 57F(12) conditions are satisfied.
Rule 57F(12) under the post-1-3-1997 Modvat scheme permits utilisation of credit of specified duty on inputs towards duty on final products without insisting on strict one-to-one correlation. The note explains that the relevant test is whether Additional Excise Duty credit was lawfully taken on the input and then used in accordance with the rule. On that construction, the objection that the same material could not be treated both as input and final product is not accepted, and the credit remains available for duty payment when the rule's conditions are satisfied.
Issues: Whether credit of Additional Excise Duty paid on unprocessed tyre cord fabric could be utilised under Rule 57F(12) of the Central Excise Rules, 1944 towards payment of duty on the same goods cleared for home consumption, notwithstanding the department's objection that the input could not simultaneously be treated as the final product.
Analysis: The appeal turned on the construction of the proviso and enacting clause of Rule 57F(12). The rule permitted utilisation of credit of specified duty on any input towards payment of duty on any other final product, and, from 1-3-1997, it did not require strict one-to-one correlation between the input on which credit was taken and the final product on which duty was paid. The Court followed the earlier view that the relevant test was whether the credit of Additional Excise Duty had been lawfully taken on the input and then utilised for duty payment in accordance with the rule. On that basis, the departmental objection that the same material could not be both input and final product was not accepted.
Conclusion: The credit was held to be validly utilisable under Rule 57F(12), and the duty demand and penalty could not stand.
Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.
Ratio Decidendi: Under the post-1-3-1997 Modvat scheme, Rule 57F(12) permits utilisation of credit of specified duty on inputs towards duty on final products without insisting on one-to-one correlation, provided the rule's conditions are satisfied.
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