MODVAT credit for captively manufactured inputs applied prospectively only, so prior-period credit was not available.

Rule 57A of the Central Excise Rules, 1944 did not expressly extend MODVAT credit to inputs manufactured within the factory and used captively in the manufacture of final products. Notification No. 197/86 introduced that benefit and, by making it operative from 14-3-1986, treated it as a new substantive concession rather than a mere clarification of existing entitlement. Credit was therefore not available for the period before that date, and the denial of MODVAT credit to the assessee was upheld.

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Issues: Whether MODVAT credit under Rule 57A of the Central Excise Rules, 1944 was available in respect of inputs manufactured within the factory and used captively in the manufacture of final products for the period prior to Notification No. 197/86 dated 14-3-1986.

Analysis: Rule 57A did not expressly provide for credit on inputs manufactured and used within the factory of production. Notification No. 197/86 introduced that benefit and stated that it would operate prospectively from 14-3-1986. The notification was therefore treated as conferring a new benefit rather than merely clarifying an existing entitlement under Rule 57A.

Conclusion: MODVAT credit on the disputed inputs was not available for the period before 14-3-1986, and the denial of credit was upheld against the assessee.

Ratio Decidendi: Where a notification expressly grants a MODVAT benefit for captively manufactured inputs and states that it operates prospectively, the benefit cannot be claimed for any prior period on the footing that the rule itself already contained that entitlement.

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