Modvat credit on ship-breaking scrap allowed where notification restriction was held inapplicable and Trade Notice supported entitlement.

Modvat credit on scrap obtained from breaking imported ships was examined against Notification No. 177/86-C.E., with the assessee relying on a contemporaneous Trade Notice to support full credit. The earlier view in Sardar Steel Mills was noted, but later Tribunal authority was preferred and treated as supporting the position that the notification restriction did not apply to this factual situation. On that basis, the restriction was held inapplicable, the denial of credit was set aside, and the assessee was found entitled to consequential relief.

---

---

Issues: Whether Modvat credit on scrap obtained from breaking of imported ships was correctly restricted under Notification No. 177/86-C.E. dated 1-3-1986, and whether the assessee could rely on the contemporaneous Trade Notice to claim the full credit.

Analysis: The restriction under the notification was challenged on the basis that the relevant Trade Notice supported the assessee's entitlement. The earlier view in Sardar Steel Mills was noted, but it had already been reconsidered in a later Tribunal decision which preferred the line of authority holding that the restriction did not apply to the assessee's situation. The existence of a Trade Notice in favour of the assessee and the later Tribunal view together supported acceptance of the credit claim.

Conclusion: The restriction was held inapplicable on the facts, and the denial of Modvat credit was set aside in favour of the assessee.

Final Conclusion: The assessee was held entitled to the disputed credit with consequential relief.

Ratio Decidendi: A contemporaneous departmental Trade Notice, read in light of later Tribunal authority, can support allowance of Modvat credit where the notification restriction is not applicable to the goods in question.

---