Modvat credit utilisation under declared input-output scheme does not require one-to-one correlation for each clearance.

Rule 57K credit for minor oils could be taken after hydrogenation and utilised for duty on vegetable products in accordance with the scheme under Rules 57N and 57P and Notification No. 27/87-C.E. The provisions did not require a clearance-wise or batch-wise one-to-one correlation between the input oil and each finished product clearance. A declared final product did not lose its character merely because a particular batch was produced without that input, and disallowance was not attracted on that ground alone where the inputs were used in later production for the same declared purpose.

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Issues: Whether credit taken in respect of minor oils under Rule 57K could be utilised for payment of duty on vegetable products even when, in a particular month or clearance, the finished product did not contain the said input.

Analysis: The scheme under Rule 57K, read with Rule 57N, Rule 57P and Notification No. 27/87-C.E. dated 1-3-1987, permits credit to be taken after the input oil is hydrogenated and to be utilised in accordance with the conditions governing time and extent of utilisation. The provisions do not require a clearance-wise or batch-wise one-to-one correlation between the input and the finished product. A declared final product does not cease to answer its description merely because a particular batch was manufactured without using the input in question. Disallowance under Rule 57P is attracted where the input is not used for the declared manufacture in the relevant scheme, but not merely because a particular clearance did not contain the input, especially where the inputs were used in later production for the same declared purpose.

Conclusion: Credit was rightly held to be utilisable, and the departmental appeal failed.

Ratio Decidendi: Under the credit scheme, utilisation of admissible credit is governed by the declared input-output structure and the notification conditions, and not by a strict one-to-one correlation between the particular input and each individual clearance of the final product.

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