Modvat credit utilisation cannot be curtailed retrospectively unless the notification expressly restricts credit already accrued.

Notification No. 18/90-C.E. (N.T.) governed the utilisation of Modvat credit for duty payment and did not, by itself, reduce the quantum of credit earned on receipt of inputs unless it expressly said so. Clause (2) of the fourth proviso was treated as regulating the rate of credit available for clearances after 16-05-1990, rather than retrospectively limiting credit already accrued on earlier input receipts. On that basis, credit at Rs. 5.25 per sq. mtr. was available for post-notification clearances, and the contrary demand and penalty were not sustainable.

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Issues: Whether the appellants, in respect of inputs received prior to 16-05-1990, were restricted to credit at Rs. 3.50 per sq. mtr. or were entitled to utilise credit at Rs. 5.25 per sq. mtr. for clearances made after that date under Notification No. 18/90-C.E. (N.T.).

Analysis: The notification regulated the utilisation of Modvat credit for payment of duty and did not create a restriction on the quantum of credit that could be taken on receipt of inputs. The language of clause (2) of the fourth proviso was read as controlling the rate at which credit could be utilised for duty payment after the notification date, rather than retrospectively limiting credit already available on prior input receipts.

Conclusion: The appellants were entitled to utilise credit at Rs. 5.25 per sq. mtr. for clearances made after 16-05-1990, and the contrary demand and penalty could not be sustained.

Ratio Decidendi: A notification restricting utilisation of credit for duty payment does not, by itself, curtail the credit available on receipt of inputs unless it expressly so provides.

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