Transitional Modvat credit may be available for inputs in stock despite no prior declaration under the general rule.

Credit of duty paid on inputs was said to be unavailable for want of prior declaration under the general Modvat declaration rule, but the dispute centred on whether the amended transitional provision could still protect inputs already lying in stock. The inputs were admittedly duty-paid and had been verified by the Department as being in stock, and the plea based on the amended transitional rule had not been examined by the lower appellate authority. The matter was therefore remitted for fresh consideration of the availability of Modvat credit under the amended transitional conditions, rather than finally disallowing credit solely for timing non-compliance with the declaration requirement.

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Issues: Whether credit of duty paid on inputs could be denied for want of prior declaration under Rule 57G of the Central Excise Rules, 1944 when the inputs were in stock and the amended transitional provision in Rule 57H of the Central Excise Rules, 1944 was specifically pleaded.

Analysis: The inputs had admittedly suffered duty and the Department's verification showed that they were lying in stock. The dispute turned on the effect of the declaration requirement under Rule 57G and the applicability of the amended Rule 57H, which permitted credit in respect of inputs received immediately before obtaining dated acknowledgement where the inputs were in stock or otherwise covered by the transitional conditions. Since the plea based on amended Rule 57H had been raised but not considered by the lower appellate authority, the matter required re-examination on the factual and legal position under the amended rule.

Conclusion: The disallowance of credit was not finally sustained and the issue was remitted for fresh consideration of the applicability of amended Rule 57H.

Final Conclusion: The order under challenge was set aside and the matter was sent back for reconsideration in accordance with law on the availability of Modvat credit under the transitional provision.

Ratio Decidendi: Where a transitional credit provision specifically covers inputs lying in stock and that plea has not been examined, the authority must consider the amended rule before denying Modvat credit solely for non-compliance with the timing of declaration under the general rule.

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