Modvat credit on pre-1-4-94 gate passes remained valid; later invoice-based procedure could not retrospectively deny credit.

Gate passes issued before 1-4-94 remained valid for Modvat credit because they were lawful duty-paying documents when issued, and a later procedural change prescribing invoices did not retrospectively invalidate them. Rule 57G permitted prescription of the document for credit, but did not authorise a cut-off date that denied credit on previously valid gate passes absent express statutory support. The restriction introduced by Notification No. 16/94 was therefore unsustainable, and denial of credit based on the 30-6-94 cut-off was held invalid.

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Issues: Whether gate passes issued prior to 1-4-94 remained valid documents for taking Modvat credit after the procedural change prescribing invoice as the document for clearance and credit.

Analysis: Modvat credit under Rule 57A was intended to avoid cascading of duty and was available subject to the conditions in Rule 57G. The earlier gate passes were issued under the then-prevailing legal procedure and evidenced payment of duty. The subsequent amendment dispensing with gate passes and prescribing invoice as the document did not, by itself, state that earlier gate passes ceased to be valid for Modvat purposes. Rule 57G empowered the prescription of a valid document, but not the imposition of a cut-off period restricting credit on gate passes already issued when such documents were legally valid. The restriction introduced by Notification No. 16/94 was therefore not supported by the rule-making power.

Conclusion: The gate passes issued prior to 1-4-94 remained valid for Modvat credit, and denial of credit on the ground of the 30-6-94 cut-off date was unsustainable; the assessee succeeded.

Ratio Decidendi: A procedural amendment changing the prescribed duty-paying document does not retrospectively invalidate earlier valid documents, and the delegated rule-making power cannot impose a cut-off period for credit unless the statute expressly authorises it.

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