Modvat credit already utilised was not reversible after later de-notification of final products, absent express recovery provision.

Modvat credit lawfully availed and utilised on inputs and inputs contained in finished goods was not liable to reversal merely because the final products were later de-notified from Rule 57A. The notification caused only the unutilised balance of credit to lapse, and there was no express provision in the Act or Rules authorising recovery of credit already taken and used. Applying the principle that validly earned and utilised credit does not become irregular solely due to a later change in scheme coverage, the Tribunal held that the demand for reversal could not be sustained.

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Issues: Whether Modvat credit already availed and utilised on inputs and inputs contained in finished goods was liable to reversal merely because the final products were later de-notified from Rule 57A, while the unutilised credit was made to lapse by notification.

Analysis: The credit standing to the manufacturers' account on the relevant date was covered by the notification providing for lapse of unutilised balance. The question was whether any provision in the Act or Rules required reversal of credit already taken and utilised on inputs lying as such or contained in finished goods. The Tribunal relied on the principle that once credit was lawfully taken and utilised, later de-notification of the final product from the Modvat scheme did not, by itself, render the earlier credit irregular. In the absence of any express provision authorising recovery or reversal of already utilised credit, and following the reasoning of the Larger Bench decision on non-reversal of credit in similar circumstances, the demand could not be sustained.

Conclusion: The credit already availed and utilised was not reversible, and the Revenue's challenge failed.

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