Modvat credit cross-utilisation was permitted for eligible inputs without one-to-one correlation or separate excise permission.

Amended Rule 57F(4) of the Central Excise Rules, 1944 allowed Modvat credit on eligible inputs received and used in the factory on or after 15-3-1995 to be cross-utilised against duty on any final product. The provision did not require one-to-one correlation between the inputs and the final product, and actual use of those inputs in that product was unnecessary. Where a declaration had been filed under Rule 57G, separate excise permission for such utilisation was also not required. On that reading, transfer and utilisation of the unutilized credit were lawful and the Revenue's challenge failed.

---

---

Issues: Whether unutilized Modvat credit relating to inputs received on or after 16-3-1995 could be transferred and utilized towards payment of duty on any final product, even if those inputs were not used in the manufacture of that final product, and whether such transfer required prior permission from the excise authority.

Analysis: Rule 57F(4) of the Central Excise Rules, 1944, as amended by Notification No. 11/95-C.E. (N.T.) dated 16-3-1995, permitted credit of specified duty on inputs received and used in the factory on or after 15-3-1995 to be utilized towards duty on any other final product, whether or not those inputs were actually used in the manufacture of that product. The relevant inputs were received within the covered period, so the statutory condition stood satisfied. The provision did not require one-to-one co-relation between the inputs and the final product, and where a declaration had been filed under Rule 57G of the Central Excise Rules, 1944, separate permission for such utilization was not necessary.

Conclusion: The transfer and utilization of the unutilized Modvat credit was lawful, and the Revenue's challenge failed.

Ratio Decidendi: Under the amended Rule 57F(4) of the Central Excise Rules, 1944, credit of duty on eligible inputs received and used on or after 15-3-1995 may be cross-utilized for any final product without proof of actual use in that product, and one-to-one correlation is not required.

---