Correct classification must be decided first before denying Modvat credit on storage tank and related articles.

Modvat credit could not be denied solely because the assessee had earlier adopted a different classification, since entitlement depended on first determining the correct classification of the storage tank and related articles. The earlier orders had not adjudicated that central question and instead proceeded on the assessee's initial classification, making the denial of credit unsustainable. The Tribunal's order and the orders below were set aside, and the matter was remitted for fresh adjudication on proper classification, after which the consequential Modvat credit issue was to be decided.

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Issues: Whether Modvat credit could be denied merely because the assessee had earlier adopted a different classification, without first adjudicating the correct classification of the storage tank and related articles.

Analysis: The earlier orders proceeded on the basis of the assessee's initial classification and did not determine the core controversy whether the goods were properly classifiable under the chapter claimed later by the assessee. Denial of Modvat credit on that basis was unsustainable because the entitlement depended upon a prior finding on the correct classification of the goods. The matter therefore required fresh adjudication on classification before any consequential credit issue could be decided.

Conclusion: The issue is answered in favour of the assessee. The Tribunal's order and the orders below were set aside and the matter was remitted for a decision on proper classification, followed by a consequential determination of Modvat credit.

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