Transitional MODVAT credit allowed for pre-declaration inputs when statutory stock and use conditions under Rule 57H are satisfied.

Rule 57H allowed transitional MODVAT credit for inputs received before filing the Rule 57G declaration if the inputs were in stock and were used in manufacture of final products cleared on or after the relevant date. On the stated facts, duty had been paid on the inputs after the relevant date, the inputs were lying in stock before declaration, and the final product became dutiable from 4-3-1986. The earlier exemption of the final product at the time the inputs were received did not defeat the transitional benefit once the declaration was filed and the statutory conditions were otherwise satisfied. Credit was therefore admissible, subject to verification of compliance with the rule.

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Issues: Entitlement to MODVAT credit under the transitional provision in respect of inputs received before filing the declaration, where the final product was initially exempt but became dutiable thereafter.

Analysis: The inputs in question had been received and were lying in stock before the declaration under Rule 57G, duty had been paid on the inputs after the relevant date, and the final product became dutiable from 4-3-1986. Rule 57H permitted credit of duty on inputs received before filing the declaration if they were in stock and were used in the manufacture of final products cleared on or after the specified date. On the facts, the conditions for availing the transitional benefit were satisfied, and the earlier exemption of the final product at the time of receipt of inputs did not bar relief once the declaration was filed and the goods became dutiable.

Conclusion: MODVAT credit was admissible under Rule 57H in respect of the qualifying inputs, subject to verification that the statutory conditions were fulfilled.

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