Transitional MODVAT credit for ship-breaking scrap allowed despite a later declaration under the excise rules.

MODVAT credit on scrap arising from ship-breaking was allowed under the transitional scheme in Rule 57H(1)(ii), even though the Rule 57G declaration was filed later. The Tribunal treated the ship brought for breaking as the input and construed the phrase "immediately before" to mean "preceding the date" of the dated acknowledgement of the declaration. On that reading, the inputs were regarded as received before the relevant date and used in producing the final product cleared thereafter. The earlier decision on the same issue was followed, and the appellants were held entitled to the claimed credit.

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Issues: Whether the appellants were entitled to MODVAT credit on the scrap manufactured from ship-breaking under the transitional provisions of Rule 57H(1)(ii) of the Central Excise Rules, 1944, even though the declaration under Rule 57G was filed later.

Analysis: The ship brought for breaking was treated as the input for the manufacture of scrap. The Tribunal held that Rule 57H was intended to operate as a transitional provision and that the expression "immediately before" in the rule should be read in the sense of "preceding the date". On that construction, the inputs were regarded as having been received before the dated acknowledgement of the declaration and as having been used in the manufacture of the final product cleared on or after the relevant date. The earlier decision in a similar matter was followed.

Conclusion: The appellants were entitled to the MODVAT credit claimed under Rule 57H(1)(ii).

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