Modvat credit on capital goods follows the law in force at installation, not receipt, where availment is deferred until use.

Modvat credit on capital goods received before an amendment but installed after it was treated as governed by the legal position prevailing on the date of installation, not the date of receipt. Credit on the generator was available in principle, but its availment was deferred until installation, and the transitional provision under Rule 57AG permitted credit under the regime then in force. Authorities concerning inputs were distinguished because those items were not eligible when received. On that basis, the restriction tying credit to the earlier regime was rejected and credit was allowed under the later regime applicable at installation.

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Issues: Whether Modvat credit on capital goods received before the amendment but installed after the amendment was to be governed by the position prevailing on the date of receipt or on the date of installation.

Analysis: The credit on the generator was available in principle, but its availment was barred until installation. The earlier authorities relied on by the Revenue concerned inputs on which credit was not available when received, which was distinguishable. Since the capital goods remained uninstalled until the legal position had changed, the applicable transitional provision permitted credit as admissible on the date when the machinery was installed. Rule 57AG was applied to hold that the assessee could take credit under the regime in force at the time of installation.

Conclusion: The issue was decided in favour of the assessee, and the Revenue's restriction of credit to the earlier regime was rejected.

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