Deemed MODVAT credit already validly taken could not be reversed merely because later instructions withdrew the benefit for stock on hand.

Credit validly availed on inputs received when deemed MODVAT credit was available under the then-operative instructions could not be reversed merely because a later amendment withdrew that benefit. The relevant event was receipt of the inputs and lawful availment of credit, not their continued presence in stock on the date of the amendment. Inputs already brought within the MODVAT scheme retained that character, so retrospective reversal was not permissible for stock remaining on the amendment date.

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Issues: Whether deemed MODVAT credit validly taken on inputs received before the amendment could be reversed merely because those inputs remained in stock on the date of the amended instruction.

Analysis: The inputs were received when the manufacturer was eligible to avail deemed credit under the Central Government's directions issued under the proviso to Rule 57G(2) of the Central Excise Rules, 1944. Once such credit was lawfully taken, the inputs came within the MODVAT scheme and their character could not be altered later merely because the Government subsequently modified the instruction and withdrew deemed credit for future use. The later amendment could not operate to undo credit already validly earned on inputs received under the earlier regime. The fact that some of the inputs were still lying in stock on the amendment date did not justify reversal, since the relevant event was receipt and credit availment when eligibility existed.

Conclusion: Reversal of deemed MODVAT credit on the stock remaining on 2-11-1987 was not permissible; the appeal failed.

Final Conclusion: Credit lawfully taken under the then-operative deemed credit scheme could not be withdrawn merely because of a later change in instructions, and the order allowing the assessee's claim was set aside by dismissing the Revenue's appeal.

Ratio Decidendi: Credit validly availed under an operative MODVAT deeming provision cannot be reversed retrospectively solely because a later amendment withdraws the benefit for inputs still in stock.

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