Modvat credit and judicial discipline: Tribunal precedent prevailed over a departmental circular, preserving credit despite exemption being available.

A departmental circular cannot override binding Tribunal precedent, and a Commissioner (Appeals) must follow higher appellate decisions as a matter of judicial discipline. The Tribunal reiterated that, where earlier decisions recognise exemption as an assessee's option and no contrary higher ruling is shown, that view governs the dispute. On that basis, Modvat credit on inputs was not disturbed even though the manufactured goods were fully exempt and duty had been paid voluntarily. The Revenue's challenge therefore failed and the allowance of credit in favour of the respondents remained undisturbed.

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Issues: Whether the respondents were entitled to Modvat credit on inputs when the goods manufactured were fully exempt but duty had been paid voluntarily, and whether the Commissioner (Appeals) was bound to follow the Tribunal decisions notwithstanding the departmental objection based on a Board circular.

Analysis: The Tribunal held that a Board circular does not bind the Commissioner (Appeals) in the same manner as a binding adjudicatory precedent, but the Commissioner (Appeals) is bound by the decision of the higher Tribunal as a matter of judicial discipline. The earlier Tribunal decisions held that availment of exemption is at the option of the assessee, and no contrary decision was shown. On that basis, the grant of Modvat credit was not disturbed.

Conclusion: The Revenue's challenge failed and the order allowing the benefit of Modvat credit was upheld.

Final Conclusion: The appeal was rejected, leaving the allowance of credit in favour of the respondents undisturbed.

Ratio Decidendi: In the absence of a contrary higher decision, an appellate authority must follow binding Tribunal precedent on the assessee's option to avail exemption, and a departmental circular cannot override that judicial discipline.

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