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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the restriction on Modvat credit under Clause (2) of Notification No. 5/94-C.E. applied only to scrap obtained from ships, boats and other floating structures manufactured in India, or whether it applied to the specified inputs irrespective of the origin of the ships from which they were obtained.
Analysis: Clause (2) covered the specified inputs falling under headings 72.30 and 73.27 obtained from breaking up of ships, boats and other floating structures as are manufactured in India and used in the manufacture of final products in India. The qualifying words were held to attach to the inputs, not to the ships alone. A trade notice could not control or override the statutory notification. The restriction on credit was therefore not confined to scrap derived from Indian-origin ships.
Conclusion: The appellant's interpretation was rejected and the restriction on credit was held applicable as invoked by the department.
Final Conclusion: The appeal was dismissed because no merit was found in the challenge to the credit restriction under the notification.
Ratio Decidendi: Where the language of a notification clearly attaches the qualifying condition to the specified inputs, the condition cannot be shifted to the source goods by construction, and a trade notice cannot override the statutory text.
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