Conflicting Tribunal views on Modvat credit for exempt intermediate products warranted reference to a Larger Bench.

Conflicting Tribunal views on Modvat credit for inputs used in manufacturing an exempt intermediate product justified reference to a Larger Bench. The earlier Larger Bench ruling treated credit as barred where the intermediate product was exempt, while later coordinate Bench decisions supported admissibility of credit in such circumstances. Because the later view did not adequately consider the Larger Bench decision and the two lines of authority were not clearly reconcilable, the issue was referred for authoritative reconsideration by a Larger Bench. The question was not decided on merits.

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Issues: Whether the appeals required reference to a Larger Bench in view of the apparent conflict between the Larger Bench decision and the later Tribunal decisions on admissibility of Modvat credit where an exempt intermediate product is cleared to another unit for manufacture of the final product.

Analysis: The order noted that the assessees relied on later Tribunal decisions supporting credit on inputs used in the manufacture of the exempt intermediate product, while the Revenue relied on the Larger Bench view that credit taking itself was barred where the intermediate product was exempt. It was observed that the later decision supporting the assessees did not give due consideration to the Larger Bench ruling, and the compatibility of those views was not free from doubt. In that situation, the matter was considered fit for examination by a Larger Bench.

Conclusion: The question was not finally decided on merits and was directed to be placed before the Hon'ble President for consideration by a Larger Bench.

Ratio Decidendi: Where a later coordinate Bench view appears inconsistent with an earlier Larger Bench decision on the same legal issue, reference to a Larger Bench is warranted for authoritative resolution.

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