Accrued Modvat credit survives a later optional levy scheme absent clear forfeiture language.

A later optional compound levy scheme did not, by itself, extinguish already accrued Modvat credit on goods manufactured before the operative cut-off date. The court treated the earlier recognised entitlement to such credit as preserved by the notification's saving and exclusion clauses, and held that forfeiture could not be implied where the scheme did not clearly and expressly provide for it. It also rejected the contention that utilisation of the accrued credit created an impermissible hybrid arrangement. The assessee was therefore entitled to avail and use the pre-existing Modvat credit, and the adverse orders were unsustainable.

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Issues: Whether, after opting for the Optional Compound Levy Scheme introduced by the later notification, the assessee could still avail and utilise Modvat credit already earned on goods manufactured prior to the earlier cut-off date.

Analysis: The earlier judicial determination had recognised the assessee's entitlement to Modvat credit on goods manufactured before the relevant cut-off date, and the later notification was examined in light of its own saving and exclusion clauses. The Court held that the later scheme did not contemplate forfeiture of already accrued credit on goods manufactured prior to the operative date, and that the assessee's earlier recognised right could not be placed below the position expressly preserved by the notification for pre-operative-date goods. The Court also rejected the view that the assessee was attempting to create an impermissible hybrid arrangement, holding instead that the accrued credit on the covered goods remained available for utilisation.

Conclusion: The question was answered in favour of the assessee. Even after opting under the Optional Compound Levy Scheme, the assessee remained entitled to avail and utilise Modvat credit on goods manufactured prior to the earlier cut-off date, and the adverse orders were unsustainable.

Ratio Decidendi: A later optional duty scheme does not extinguish an accrued and judicially recognised Modvat credit on goods manufactured before the scheme's operative date unless the notification clearly and expressly provides for such forfeiture.

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