Modvat credit on debited inputs could be taken in the personal ledger account, not only RG-23A Part-II.

Under the Modvat scheme, credit equal to the amount debited on removal of inputs was not confined to RG-23A Part-II. Rule 57F(6) required the prescribed debit to be made in the account maintained under Rule 57G(7) or in the current account under Rule 9 or Rule 173G(1), and Rule 57F(7) entitled the manufacturer to take credit of the same amount. On that construction, the expression covered both the RG-23A Part-I/Part-II account and the account current, so credit in the personal ledger account/current account was valid. The disallowance was therefore unsustainable.

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Issues: Whether, under the Modvat scheme, credit equal to the amount debited on removal of inputs under Rule 57F(4) could validly be taken in the personal ledger account/current account instead of being confined to RG-23A Part-II.

Analysis: Rule 57F(6) required the prescribed debit to be made in the account maintained under Rule 57G(7) or in the account current maintained under Rule 9 or Rule 173G(1). Rule 57F(7) then entitled the manufacturer to take credit of an amount equal to the amount so debited. The expression used in Rule 57F(7) was held to cover both the RG-23A Part-I/Part-II account and the account current contemplated by Rule 57G(7). On that construction, the credit was not restricted to RG-23A Part-II alone and the earlier Tribunal view supporting that interpretation was followed.

Conclusion: The credit taken in the personal ledger account/current account was valid, and the disallowance was unsustainable.

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