Modvat credit may be used for additional excise duties when no express restriction exists under the relevant rules and notifications.

Modvat credit of basic excise duty paid on capital goods and inputs could be utilised for payment of additional duties of excise. Rule 57Q of the Central Excise Rules, 1944 permitted credit to be used for duty of excise payable on final products and did not confine it to the same kind of duty. Notification No. 5/94-C.E. imposed no restriction on using basic excise duty credit, and Notification No. 24/94(N.T.) only restricted the use of credit in relation to the specified additional duties, without barring basic excise duty credit against them. In the absence of an express restriction, the contrary view was unsustainable.

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Issues: Whether credit of basic excise duty paid on capital goods and inputs could be utilised for payment of additional duties of excise.

Analysis: Rule 57Q of the Central Excise Rules, 1944 permitted utilisation of credit for payment of duty of excise payable on final products and did not limit the credit to payment of only the same kind of excise duty. Notification No. 5/94-C.E. dealt with Modvat credit on inputs and did not impose a restriction against use of credit of basic excise duty on capital goods. Notification No. 24/94(N.T.) dated 20-5-1994 restricted only the use of additional duty of excise collected under Section 3 of the Additional Duties of Excise (Textile & Textile Articles) Act, 1978 and Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and did not prohibit use of basic excise duty credit towards those additional duties.

Conclusion: Credit of basic excise duty on capital goods and inputs could be used for payment of additional duties of excise, and the contrary view was unsustainable.

Ratio Decidendi: In the absence of an express statutory or notification-based restriction, Modvat credit of basic excise duty may be utilised for payment of other excise-related duties payable on the final product.

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