Modvat credit on air-conditioners used for electronic equipment could not be denied by retrospective amendment.

Modvat credit under erstwhile Rule 57Q was admissible on air-conditioners used to maintain the temperature of electronic equipment, because they were not used for office premises and served an input-related function for the equipment. The later exclusion of air-conditioners from Rule 57Q, effective from 23-7-1996, could not be applied retrospectively to deny credit for the earlier period. The denial based on retrospective operation of the amendment was therefore unsustainable.

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Issues: Whether Modvat credit was admissible on air-conditioners used for maintaining the temperature of electronic equipment, and whether the later exclusion of air-conditioners from Rule 57Q could be applied retrospectively to deny credit for the earlier period.

Analysis: The appeal related to a period prior to 23-7-1996, when air-conditioners were specifically excluded from the scope of Rule 57Q. The exclusion introduced with effect from that date could not be treated as having retrospective operation. The air-conditioners were not used in office premises but were used only for maintaining the temperature of electronic equipment, and on that footing the credit could not be denied for the earlier period.

Conclusion: Modvat credit under the erstwhile Rule 57Q was admissible, and the denial based on retrospective application of the later amendment was unsustainable.

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