Modvat credit on capital goods before installation was valid for the pre-1996 period, with no implied installation .

Modvat credit on capital goods was permissible before actual installation for the period before the 1-1-1996 amendment. The relevant Modvat Rules in March 1994 to September 1994 contained no express condition requiring installation before credit availment, and the definition of capital goods could not be read to imply such a restriction. On that basis, credit taken and utilised before installation was treated as valid for the relevant period, and the duty demand and penalty could not survive.

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Issues: Whether Modvat credit on capital goods could be taken and utilised before actual installation of the capital goods for the period prior to the amendment introduced on 1-1-1996.

Analysis: The amendment restraining availment of Modvat credit on capital goods before installation was introduced only with effect from 1-1-1996. For the relevant period, March 1994 to September 1994, the Modvat Rules contained no such condition. The definition of capital goods could not be read as an implied pre-condition that installation must precede credit availment.

Conclusion: The credit taken and utilised before installation during the relevant period was permissible, and the duty demand and penalty could not survive.

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