Modvat credit on capital goods taken before a later exemption cannot be reversed merely due to the amendment.

Capital goods Modvat credit validly taken before an exemption notification was amended could not be denied or reversed merely because the later amendment required non-availment of such credit for exemption. The earlier availment remained proper under the legal position then in force, and a subsequent restrictive condition could not retrospectively invalidate it. The fact that the credit was not used thereafter and clearances were made on payment from PLA further supported the assessee's case. The demand for reversal of the already availed credit was therefore not sustainable, and the impugned orders were set aside in favour of the assessee.

---

---

Issues: Whether Modvat credit on capital goods, taken before the amendment of the exemption notification, could be denied or reversed on the ground that the amended notification later required non-availment of such credit for claiming exemption.

Analysis: The appellants had availed capital goods Modvat credit before the amendment introducing the restrictive condition in the exemption notification. The dispute arose only because the later amendment required non-availment of credit to obtain the exemption. Since the credit had been validly taken earlier under the then prevailing legal position, the subsequent amendment could not render that earlier availment improper. The authority also noted that the appellants were not utilizing the credit thereafter and were clearing goods on payment from PLA, which supported their case against reversal of the credit already taken.

Conclusion: The demand for reversal of the already availed Modvat credit was not sustainable, and the impugned orders were set aside in favour of the assessee.

---