Transitional Modvat credit cannot be denied when the final product's correct classification was settled only later.

Transitional Modvat credit under Rule 57H was held admissible where the final product had been declared under Rule 57G and its correct classification under Chapter 48 was determined only later. Because the product was treated under Chapter 39 at the relevant time, the assessee could not be faulted for not filing a declaration in 1987 on the basis of a classification settled only in 1989. On that footing, credit on inputs in stock and used in manufacture could not be denied merely due to the earlier declaration, and the denial of credit was unjustified.

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Issues: Whether transitional Modvat credit under Rule 57H of the Central Excise Rules, 1944 was admissible when the final product had been declared under Rule 57G and its correct classification under Chapter 48 was determined only later.

Analysis: The final product had been declared under Rule 57G at the relevant time, and the correct classification under Chapter 48 was settled only in 1989. In these circumstances, the assessee could not be faulted for not having filed a declaration in 1987 on the basis of the later classification. Since the product was covered under Chapter 39 at the relevant time, there was no valid basis to deny transitional Modvat credit on inputs lying in stock and used in the manufacture of the final product.

Conclusion: Transitional Modvat credit under Rule 57H was admissible and the denial of credit was unjustified.

Final Conclusion: The assessee was entitled to the disputed transitional Modvat credit, with consequential relief according to law.

Ratio Decidendi: Where the correct classification of the final product is determined only later, transitional Modvat credit cannot be denied merely because the earlier declaration reflected the classification applicable at the relevant time.

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