Indefeasible Modvat credit cannot be reversed when later notification withdraws eligibility for future availment.

Credit validly earned under a prevailing Modvat scheme could not be reversed merely because a later notification withdrew eligibility for future inputs. The inputs were eligible when the credit was taken, the withdrawal notification was not retrospective, and there was no finding that the credit had been wrongly availed at inception. The accrued entitlement was treated as indefeasible, so the assessee was entitled to retain the Modvat credit and the Revenue's objection failed.

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Issues: Whether Modvat credit validly earned on inputs before the issue of a notification withdrawing eligibility could be required to be reversed in respect of inputs lying in stock on the date of withdrawal.

Analysis: The credit in question had been taken when the inputs were eligible under the Modvat scheme. The subsequent notification was not retrospective, and there was no finding that the credit had been wrongly availed when earned. Credit validly taken under the then prevailing scheme was treated as available without limitation in time, and later withdrawal of eligibility did not destroy the accrued entitlement. The legal position was supported by prior authorities holding that credit already earned could not be compelled to be expunged merely because the input or final product later became ineligible.

Conclusion: The credit already earned was not liable to reversal, and the Revenue's objection failed.

Final Conclusion: The order allowing the assessee to retain the Modvat credit was upheld, and the Revenue's challenge was rejected.

Ratio Decidendi: Credit validly earned under a prevailing Modvat scheme is indefeasible and cannot be retrospectively reversed merely because a later notification withdraws eligibility for future availment.

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