MODVAT credit lapse on pre-cut-off imports applies even when credit is formally taken after the effective date.

Credit attributable to imports made before 16.03.1995 was governed by Rule 57F(4A) of the Central Excise Rules, which caused unutilised specified duty credit to lapse for manufacturers of tractors or motor vehicles. The decisive factor was the date the credit arose, not the later date on which the credit certificate was issued or the MODVAT credit was formally availed. The Madras HC held that where the underlying imports pre-dated the cut-off, the credit remained within the lapse provision even if taken after 16.03.1995, and declined to read the rule contrary to its intended effect. The assessee's claim was rejected.

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Issues: Whether credit of differential duty arising from pre-16.03.1995 imports, but availed after 16.03.1995, was hit by Rule 57F(4A) of the Central Excise Rules and thereby lapsed, or remained available to be utilized under Rule 57E.

Analysis: Rule 57F(4A), introduced with effect from 16.03.1995, provided that any credit of specified duty lying unutilized on that date with a manufacturer of tractors or motor vehicles would lapse and could not be used for payment of duty. The decisive factor was not the date on which the credit certificate was issued, but the fact that the credit arose from imports made before 16.03.1995. The Court held that if the correct duty had been paid at the time of import and MODVAT credit had been taken then, the credit would have fallen within the lapse provision. The subsequent issuance of certificates and taking of credit after 16.03.1995 did not alter the character of the credit or take it outside the sweep of the rule. The Court also declined to rewrite the provision by reading it contrary to its intended effect.

Conclusion: The credit was held to have lapsed under Rule 57F(4A), and the assessee's claim was rejected.

Ratio Decidendi: Credit attributable to imports made before the cut-off date remains governed by the lapse provision in Rule 57F(4A), even if the credit is formally availed only after that date.

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