Modvat credit on inputs does not require one-to-one correlation with each final product absent a specific rule.

Under the Modvat scheme, credit on polystyrene could not be denied merely because the assessee did not establish one-to-one correlation between the input and each final product. The Tribunal noted that the final products included goods for which polystyrene was an admitted input, and the Revenue did not dispute use of the input in or in relation to manufacture. A Board circular could not override the settled position that product-wise utilisation was not an inherent requirement for Modvat credit unless the governing rule specifically so provided. The denial of credit was therefore unsustainable and the credit was admissible.

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Issues: Whether Modvat credit on polystyrene could be denied on the ground that the assessee had not established a one-to-one correlation between the input and the final product.

Analysis: The declared final products included goods for which polystyrene was an admitted input, and the Revenue did not dispute that the input was used in or in relation to the manufacture of the final products. The governing Modvat scheme did not require the assessee to prove product-wise utilisation of each input against a particular final product. The Board circular relied on by the Revenue could not override the settled legal position laid down by the Tribunal that one-to-one correlation was not an inbuilt requirement for availment of Modvat credit.

Conclusion: The denial of Modvat credit was unsustainable and the credit was admissible to the assessee.

Ratio Decidendi: Under the Modvat scheme, one-to-one correlation between input and final product is not a condition for availment of credit unless specifically mandated by the governing rule.

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