Modvat credit lapse under amended excise scheme upheld where unutilized capital goods credit survived the 01.08.1997 transition.

Modvat credit lying in the assessee's capital goods account on 31.07.1997 was held liable to lapse under Notifications No. 33/1997-CE (N.T.) and 34/1997-CE (N.T.) issued from 01.08.1997. The Tribunal noted that the amended scheme under Section 3A of the Central Excise Act, 1944 and the connected notifications expressly provided for lapse of unutilized credit, and that Eicher Motors arose in a different factual and legal context involving credit on inputs already used in manufacture before the amendment. The earlier ruling did not control the operation of the new notifications, and res judicata could not be used to extend it to these facts.

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Issues: Whether the Modvat credit lying in the assessee's capital goods account on 31.07.1997 lapsed under Notifications No. 33/1997-CE (N.T.) and 34/1997-CE (N.T.) dated 01.08.1997, and whether the ratio of Eicher Motors could be applied to prevent such lapse.

Analysis: The respondent had availed credit under Rule 57Q of the Central Excise Rules, but the amended scheme introduced from 01.08.1997 under Section 3A of the Central Excise Act, 1944 and the connected notifications provided for lapse of unutilized credit. The earlier decision in Eicher Motors related to a different factual and legal setting, where the credit had arisen on inputs already used in manufacture before the amendment; it did not deal with the validity or operation of the present notifications or with the compound levy scheme under Section 3A. The Tribunal held that res judicata could not be invoked to extend that decision to the present facts.

Conclusion: The credit available in the capital goods account on 31.07.1997 was liable to lapse, and the Revenue's appeal was to be allowed.

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