Deemed Modvat credit remains usable later when lawfully earned and no rule provides for lapse or reversal.

Accumulated deemed Modvat credit lawfully earned under an earlier notification did not lapse on rescission of that notification because no express statutory or notified provision required lapse or reversal. The subsequent introduction of the deemed credit facility, together with withdrawal of the compounded levy scheme, restored the position in which the credit could be used. In the absence of any legal bar to retention of the accumulated credit, the assessee remained entitled to utilise it later, either by refund or by direct adjustment against duty. Section 11B was not treated as defeating the claim on the facts stated, and the Revenue's objection failed.

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Issues: Whether the accumulated deemed Modvat credit earned under the earlier notification lapsed on rescission of that notification and, if not, whether it could be utilised subsequently after the compounded levy scheme was withdrawn.

Analysis: The credit had been lawfully earned under the earlier notification and there was no express provision providing for its lapse or reversal on rescission of that notification. The subsequent introduction of the deemed credit facility and the withdrawal of the compounded levy scheme restored the position in which the credit could be used. The absence of any legal bar against retention of the accumulated credit meant that the assessee retained entitlement to utilise it later, whether by way of refund or direct adjustment against duty. Section 11B was also not treated as a barrier to the assessee's claim in the facts of the case.

Conclusion: The accumulated deemed Modvat credit did not lapse and the assessee was entitled to utilise it subsequently. The Revenue's objection failed.

Ratio Decidendi: Where credit is lawfully earned and no statutory or notified provision provides for its lapse or reversal, the credit remains available for subsequent utilisation notwithstanding a temporary interruption in its use.

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