Retrospective notification and unstayed Tribunal precedent sustained Modvat credit relief against exclusion under Rule 57Q.

Modvat credit could not be denied where the exclusion clause under Rule 57Q was invoked against goods used in manufacturing intermediate products, because Notification No. 14/96-C.E. was treated as retrospective. The Tribunal stated that earlier decisions supporting retrospective relief continued to operate since they had not been stayed merely because a reference application was filed in the High Court. On that basis, the denial of Modvat credit and the related penalty were held unsustainable, and the assessee was entitled to the benefit of the notification.

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Issues: Whether Modvat credit could be denied on the ground that the goods were used in the manufacture of intermediate products falling under Chapter 54 and were covered by the exclusion clause under Rule 57Q, notwithstanding Notification No. 14/96-C.E. granting retrospective relief.

Analysis: The appellate authority had allowed the assessee's appeal by following earlier Tribunal decisions which treated Notification No. 14/96-C.E. as retrospective. The Tribunal noted that those earlier decisions had not been stayed merely because a reference application had been filed in the High Court, and therefore continued to hold the field. On that basis, the denial of Modvat credit and the related penalty were not sustainable.

Conclusion: The denial of Modvat credit was not justified, and the assessee was entitled to the benefit of the retrospective notification.

Final Conclusion: The Revenue's challenge failed, and the order granting Modvat credit relief to the assessee was upheld.

Ratio Decidendi: A Tribunal decision continues to operate unless stayed, and a retrospective notification can override the basis on which Modvat credit was denied.

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