MODVAT credit on notified inputs requires both notification eligibility and an acknowledged Rule 57G declaration before credit can be taken.

MODVAT credit on Lactose was unavailable for any period before the fresh Rule 57G declaration was acknowledged, because credit under Rule 57A arises only for inputs specified by notification and Lactose became eligible only on its inclusion by Notification No. 83/87 with effect from 1-3-1987. A prior declaration could not validate credit for a period when the input was not yet a notified item, and credit was permissible only from the date the relevant declaration was acknowledged; the denial of credit was therefore upheld.

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Issues: Whether MODVAT credit on Lactose could be taken for the period before the fresh declaration under Rule 57G was acknowledged, when the input became eligible only after the amending notification.

Analysis: Rule 57A permits MODVAT credit only in respect of inputs specified by notification. Lactose, though declared earlier, was not an eligible input under Notification No. 177/86. It became a specified input only by Notification No. 83/87 with effect from 1-3-1987. Rule 57G requires a manufacturer to file a declaration describing the input and final product and allows credit only after acknowledgement of that declaration. Since the declaration covering Lactose was filed only in June 1987, credit could be taken only from the date of acknowledgement and not before. The earlier declaration could not operate for a period when the item was not yet a notified input.

Conclusion: The claim for MODVAT credit prior to the acknowledged declaration was not sustainable and the denial of credit was upheld.

Ratio Decidendi: MODVAT credit becomes available only when the input is specified by notification under Rule 57A and, in addition, a declaration under Rule 57G covering that input has been acknowledged; credit cannot be taken for any earlier period.

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