Modvat Credit and Exemption Notification: duty-paid inputs still qualified for concessional duty under the notification

Import of chlorosilanes on which Modvat credit was taken did not, by itself, disqualify the assessee from the concessional duty under Notification No. 132/86 for manufacture of silicones in primary form. The notification was read according to its express language: it allowed the concession where inputs had suffered excise duty or additional duty of customs, and no further restriction could be imported from later notifications or from Rule 57F(1)(ii). On that basis, duty-paid character was not lost merely because credit had been availed, so denial of the concessional rate was unsustainable.

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Issues: Whether availment of Modvat credit on imported chlorosilanes disentitled the assessee from the concessional rate of duty under Notification No. 132/86 for manufacture of silicones in primary form.

Analysis: The notification granted concessional duty where the inputs had already suffered excise duty or additional duty of customs, and it did not contain the express prohibition found in later notifications. The governing principle applied was that a taxing exemption notification must be read as it stands and cannot be cut down by importing limitations not stated in its language. Rule 57F(1)(ii) was held to be relevant to the clearance of inputs on reversal of credit, but not to add a restriction into Notification No. 132/86. The fact that Modvat credit was taken did not, by itself, destroy the character of the inputs as duty-paid inputs for the purpose of the notification.

Conclusion: The assessee remained entitled to the concessional rate under Notification No. 132/86, and denial of the benefit on the ground of Modvat credit was unsustainable.

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