Modvat credit cannot be retained as a protective balance after dutiable classification is upheld for the relevant period.

Modvat credit on inputs could not be retained as unutilised RG 23A balance once the final product's dutiable classification had already been upheld for the relevant period and consequential relief had been granted. The Tribunal reasoned that the earlier classification ruling removed the basis for keeping the credit as a protective reserve, and the Modvat scheme did not permit preservation of credit merely against a possible future Supreme Court reversal. Any lawful relief could be sought if that contingency later arose. The assessee was therefore not entitled to retain the credit balance, and reversal of the credit was upheld.

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Issues: Whether Modvat credit taken on inputs could be retained in the RG 23A account as unutilised credit where the final product had been held classifiable as dutiable and consequential relief had followed.

Analysis: Credit had been taken after filing the prescribed declaration, but the credit remained unutilised. The Tribunal noted that the earlier classification decision in favour of the assessee covered the same period and that consequential relief had also been granted, so the basis for retaining the credit balance no longer survived. Retention of credit merely as protection against a possible future adverse decision of the Supreme Court was not supported by the Modvat scheme. The assessee could seek lawful relief if the future contingency arose, but there was no present ground to preserve the credit balance.

Conclusion: The assessee was not entitled to retain the Modvat credit balance, and the order directing reversal was upheld.

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