Modvat credit already validly earned cannot be reversed merely because the scheme is later withdrawn for the finished product.

Modvat credit validly earned when the inputs and final products were covered by the scheme could not be reversed merely because the facility was later withdrawn for the finished product. The credit had been taken after the Rule 57A conditions and Rule 57G declaration requirement were satisfied, and its utilisation was in accordance with Rule 57F. In the absence of any express provision authorising recovery or reversal of credit already validly taken and used, and without a required one-to-one correlation between particular inputs and final goods for denying earlier credit, no demand for reversal could be sustained.

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Issues: Whether Modvat credit, validly taken and utilised when the inputs and final products were covered by the Modvat scheme, could be reversed merely because the facility was later withdrawn for the final product while some inputs remained in stock.

Analysis: The credit was taken when the conditions under Rule 57A and the declaration requirement under Rule 57G stood satisfied. The subsequent withdrawal of Modvat for aerated water did not create any express provision for recovery or reversal of credit already validly earned and utilised under Rule 57F. The scheme did not contemplate a one-to-one correlation between particular inputs and finished goods for the purpose of denying the earlier credit. As the utilisation of credit was in accordance with the Rules, no demand for reversal could be sustained.

Conclusion: The credit was correctly taken and utilised, and the assessee could not be required to reverse it.

Final Conclusion: The Revenue's challenge failed, and the order allowing retention of the Modvat credit was upheld.

Ratio Decidendi: Credit validly earned under the Modvat scheme cannot be reversed in the absence of an express rule merely because the scheme is subsequently withdrawn for the finished product.

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