Modvat credit does not alter duty-paid character of inputs, so exemption benefit remains unless expressly excluded.

Availment of Modvat credit does not, by itself, strip inputs of their duty-paid character. On that reasoning, waste arising during manufacture from such inputs could not be excluded from the benefit of Notification No. 14/92 unless the notification expressly so provided. The Tribunal relied on earlier authority and applied a strict construction of the exemption notification according to its own language, finding no words that denied the benefit on credit availment. The Revenue's challenge to the Commissioner's view therefore failed, and the assessee's entitlement under the notification was left undisturbed.

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Issues: Whether inputs lose their duty-paid character on availment of Modvat credit so as to exclude waste arising therefrom from the benefit of Notification No. 14/92 dated 1-3-92.

Analysis: The Commissioner had held that availing Modvat credit does not change the duty-paid character of the inputs and, therefore, waste emerging during manufacture from such inputs cannot be treated as intermediate goods for denying the notification benefit. The Tribunal found support for this view in earlier Tribunal authority and noted that, if the intention were to deny the benefit upon availment of credit, the notification would have used express words to that effect. In the absence of any contrary decision, the notification was required to be construed on its own terms and strictly.

Conclusion: Availment of Modvat credit does not by itself strip the inputs of their duty-paid character, and the Revenue's challenge to the Commissioner's finding failed.

Final Conclusion: The appeal was rejected and the assessee's entitlement under the notification as upheld by the Commissioner remained undisturbed.

Ratio Decidendi: Availment of Modvat credit does not alter the duty-paid character of inputs unless the exemption notification expressly so provides; exemption notifications are to be construed strictly according to their language.

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