Pre-MODVAT credit deemed available before MODVAT commencement and transferable to R.G. 23A under the transition rule.

Credit earned under the pre-MODVAT Rule 56A procedure, though quantified and sanctioned only after MODVAT commenced because proceedings were pending, was treated as deemed available before the new regime began. The construction adopted gave effect to the scheme's object, so the credit was regarded as lying in R.G. 23 and transferable to R.G. 23A under Rule 57H(3). On that basis, credit attributable to the earlier period was eligible for transfer despite the later sanction.

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Issues: Whether credit allowed under Rule 56A of the Central Excise Rules for a period prior to the MODVAT scheme, but quantified and sanctioned after the scheme came into force, could be treated as credit lying in the R.G. 23 account and transferred to R.G. 23A under Rule 57H(3) of the Central Excise Rules.

Analysis: The credit was not disputed on merits and related to the period before the MODVAT scheme. The delay in quantification and sanction occurred because the proceedings were pending before the lower authority. The rule was held to require a construction that advances the object of the scheme, so that credit attributable to the pre-MODVAT period is deemed to have been available before the commencement of the new regime. On that basis, once the credit was allowed, it had to be regarded as available in R.G. 23 for transfer to R.G. 23A under Rule 57H(3).

Conclusion: The transfer of credit was correctly allowed and the Revenue's appeal failed.

Ratio Decidendi: Credit earned for the pre-MODVAT period under the earlier procedure, though sanctioned later due to pending proceedings, is to be treated as deemed available before commencement of the MODVAT scheme and is transferable under Rule 57H(3) when such construction advances the scheme's object.

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