Modvat credit on inputs requires genuine intention to use in the declared final product; speculative use is insufficient.

Under the Modvat scheme, credit was available only for inputs genuinely intended to be used in the declared final product, and the declaration had to identify those inputs with specificity. Since the evidence showed that only Grade 5702 polyurethane resin was actually used in the lacquer based synthetic polymer, and the officers' statements did not show a real intention to use the other grades, credit on those other grades was not admissible. A mere possibility, desire, or speculative future use could not satisfy the statutory requirement of intention to use, so the Revenue's position was upheld.

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Issues: Whether credit taken on polyurethane resin of grades other than Grade 5702 was admissible for payment of duty on lacquer based synthetic polymer on the footing that such inputs were intended to be used in its manufacture.

Analysis: Rule 57G(1) required the declaration to specify the inputs intended to be used in each final product, and Rule 57F(3) permitted utilisation of credit only in respect of inputs so intended. The evidence recorded by the authorities showed that the petitioner actually used only Grade 5702 for the product in question, and the statements of its officers did not reflect any real intention to use the other grades. A mere possibility, desire, or future experimental use could not be equated with the statutory requirement of intention to use. The authorities, therefore, were justified in holding that the credit on the other grades was not available.

Conclusion: The credit demand was valid and the challenge failed; the decision was in favour of the Revenue.

Ratio Decidendi: Under the Modvat scheme, credit on inputs is available only for inputs genuinely intended to be used in the declared final product, and a mere possible or speculative use is insufficient.

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