Transitional MODVAT credit extends beyond stock inputs to eligible inputs used in goods cleared after the specified date.

Existence of an alternate remedy did not justify rejecting the petition when it had already been admitted and the appeal period had expired during its pendency. Rule 57H of the Central Excise Rules, 1944 was construed as having two distinct limbs: one covering inputs in stock or received after declaration, and another covering inputs used in the manufacture of final products cleared on or after 1-3-1987. Credit could not be confined to stock inputs alone, as that would nullify the second limb. Transitional MODVAT credit was therefore admissible for qualifying inputs used in cleared goods, subject to verification from departmental and manufacturer records.

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Issues: (i) Whether the petition could be dismissed on the ground of availability of an alternate remedy; (ii) whether credit under Rule 57H of the Central Excise Rules, 1944 was admissible only for inputs lying in stock or also for inputs already used in the manufacture of final products cleared on or after 1-3-1987.

Issue (i): Whether the petition could be dismissed on the ground of availability of an alternate remedy.

Analysis: The petition had already been admitted and the period for filing an appeal had expired during its pendency. In these circumstances, the existence of an alternate remedy did not justify non-suiting the petitioners at the final stage.

Conclusion: The preliminary objection based on alternate remedy was rejected.

Issue (ii): Whether credit under Rule 57H of the Central Excise Rules, 1944 was admissible only for inputs lying in stock or also for inputs already used in the manufacture of final products cleared on or after 1-3-1987.

Analysis: Rule 57H contained two distinct limbs. One covered inputs lying in stock or received after filing of the declaration under Rule 57G, while the other covered inputs used in the manufacture of final products cleared from the factory on or after 1-3-1987. A construction confining relief only to stock-in-hand inputs would render the second limb ineffective. The authority was required to consider the full scope of the transitional provision and verify the inputs on the basis of the departmental and manufacturer records.

Conclusion: Credit was admissible for inputs used in the manufacture of final products cleared on or after 1-3-1987, and the contrary order was erroneous to that extent.

Final Conclusion: The petitioners were entitled to MODVAT credit in respect of qualifying inputs used for goods cleared on or after 1-3-1987, and the impugned order was set aside to that limited extent with directions for verification and grant of credit.

Ratio Decidendi: A transitional MODVAT provision must be construed to give effect to each of its distinct limbs, and credit cannot be confined only to stock inputs when the rule expressly extends to inputs already consumed in manufacturing final products cleared within the specified period.

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