Modvat credit on capital goods depends on their use when received; later dutiable use does not revive a denied entitlement.

Modvat credit on capital goods was determined by their use at the time of receipt in the factory, and the later conversion of the final product into a dutiable product did not revive entitlement once credit was unavailable for exempted manufacture. The declaration under Rule 57T did not change the operative position, because the decisive fact was the actual use of the goods when received and installed. No error apparent on the face of the record was shown, so rectification was not maintainable and the earlier denial of credit remained undisturbed.

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Issues: Whether the declaration filed under Rule 57T of the Central Excise Rules, 1944, or the subsequent use of the capital goods for dutiable manufacture, created an error apparent on the face of the record warranting rectification of the Tribunal's earlier order denying Modvat credit.

Analysis: The Tribunal held that eligibility to Modvat credit had to be examined at the time the capital goods were received in the factory. At that point, the capital goods were being used for manufacture of fully exempted final products, so credit was not available. The declaration under Rule 57T that the capital goods would not be used exclusively for exempted final products did not alter this conclusion, because the decisive factor was the actual position when the goods were received and installed. A later change in use, after the exempted product became dutiable, could not revive a credit entitlement that had already been determined against the assessee.

Conclusion: No error apparent on the face of the record was shown, and the rectification application was not maintainable.

Final Conclusion: The earlier denial of Modvat credit remained undisturbed, and the request to correct the order was declined.

Ratio Decidendi: Modvat credit on capital goods is determined with reference to their use at the time of receipt, and a later use for dutiable manufacture does not revive an entitlement that was unavailable when the goods were received for exempted production.

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