Modvat credit on intermediate products remained capped by the applicable notification, and Rule 57J did not override the scheme restriction.

Modvat credit on intermediate products remained subject to the notification in force during the relevant period, so the 95% restriction applied to credit taken in February 1999. Rule 57J was treated as part of the same Modvat framework and not as an independent regime overriding Rule 57A or the notification-based limitation. Its function was to permit credit on intermediate products, but not to displace the scheme-wide restriction. The assessee therefore could not claim 100% credit and was confined to 95% credit under the applicable notification.

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Issues: Whether the assessee was entitled to Modvat credit at 100% instead of 95% in respect of intermediate products, and whether Rule 57J operated independently so as to override the restriction under the notification issued in the Modvat scheme.

Analysis: The credit availed in February 1999 was governed by Notification No. 14/98, which had amended the earlier notification and was then in force. The restriction of credit to 95% applied during the relevant period. Rule 57J was treated as part of the same Modvat scheme and not as a separate regime overriding the main provision under Rule 57A. The insertion of Rule 57J was understood as enabling credit on intermediate products, but not as displacing the notification-based restriction applicable to the scheme as a whole.

Conclusion: The assessee was not entitled to 100% Modvat credit and was restricted to 95%.

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