Purposive interpretation of Modvat credit rules prevents a rigid one-month limit where inputs were in stock and duty-paid.

Rule 57H Modvat credit was explained as a beneficial provision that must be construed purposively, with emphasis on receipt of inputs, evidence of duty payment and filing of the declaration. The expression "immediately before" cannot be read as a rigid one-month limit unless the rule itself so provides. On that construction, inputs already in stock and otherwise eligible for credit could not be excluded merely because they were received more than one month before the declaration. The stated position is that restricting deemed credit to one month was not sustainable and the assessee was entitled to the benefit.

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Issues: Whether deemed Modvat credit under Rule 57H of the Central Excise Rules, 1944 could be restricted to inputs received only within one month before the filing of the declaration, when the inputs were in stock and duty payment evidence was available.

Analysis: The scheme of Modvat required consideration of receipt of inputs with evidence of duty payment and the filing of the declaration. The expression "immediately before" in Rule 57H was construed in the context of the statutory purpose, and the benefit could not be limited by importing a rigid one-month period in the absence of such definition in the rule. A narrow construction would defeat the legislative intent and produce incongruous results by excluding inputs already lying in stock though otherwise eligible.

Conclusion: The restriction of deemed credit to one month preceding the declaration was not sustainable, and the assessee was entitled to the benefit.

Ratio Decidendi: A beneficial Modvat provision must be interpreted purposively, and the words "immediately before" in Rule 57H cannot be confined to a fixed one-month period where the inputs were in stock and the other conditions for credit were satisfied.

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