Modvat credit entitlement upheld where Rule 57E amendment was treated as procedural and could not defeat accrued credit rights.

The substantive right to Modvat credit arose under Rule 57A, while Rule 57E operated only as an adjustment mechanism when duty on inputs changed later. An amendment to Rule 57E was treated as procedural and clarificatory, not as a change that took away accrued credit entitlement. Because the Modvat scheme was intended to avoid duty on duty, the assessee remained entitled to credit for differential duty paid after receipt of inputs. The amendment was therefore not applied in a way that defeated that entitlement, and the credit claim was upheld.

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Issues: Whether the assessee was entitled to Modvat credit on differential duty paid after receipt of inputs, and whether the amendment to Rule 57E of the Central Excise Rules, 1944 operated prospectively so as to deny such credit.

Analysis: Rule 57A was the substantive provision conferring the right to claim Modvat credit, while Rule 57E dealt with adjustment of credit where duty on inputs was subsequently varied. The amendment to Rule 57E did not alter the underlying entitlement to credit; it only regulated the procedure for adjustment. The object of the Modvat scheme was to avoid duty on duty, and the later change in Rule 57E was construed as procedural and clarificatory, not as affecting accrued substantive rights. On that footing, the assessee's claim to credit for the differential duty paid after receipt of the inputs was maintainable.

Conclusion: The amendment to Rule 57E was not prospective in a manner that defeated the assessee's entitlement, and the assessee was entitled to take the Modvat credit claimed.

Final Conclusion: The department's appeal failed, and the assessee's entitlement to the credit was upheld.

Ratio Decidendi: A statutory amendment that merely regulates adjustment of Modvat credit is procedural and clarificatory, and does not take away the substantive right to credit conferred by the scheme.

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