MODVAT credit eligibility under amended transitional rules allowed duty-paid inputs received before declaration to qualify.

Under the amended MODVAT transitional provision, duty-paid inputs received immediately before filing the declaration could qualify for credit where the statutory conditions were satisfied. The text explains that, once permission to avail MODVAT credit was granted after the amendment to Rule 57H, the amended rule governed entitlement and the earlier restrictive version should not defeat the benefit. It also notes a liberal interpretation of the phrase concerning inputs received immediately before the declaration, consistent with the scheme's purpose. On that basis, reversal of credit under Rule 57I was treated as unsustainable.

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Issues: Whether the assessee was entitled to MODVAT credit on inputs received before filing of the declaration, in view of the amended Rule 57H of the Central Excise Rules, 1944, and whether the reversal of credit under Rule 57I was justified.

Analysis: The inputs were duty paid and used in the manufacture of the final product. On the date permission was granted to avail MODVAT credit, Rule 57H had already been amended, and the amended transitional provision permitted credit of duty paid on inputs received immediately before obtaining the dated acknowledgement of the declaration, where the statutory conditions were satisfied. The amendment was treated as operating in the context of the MODVAT scheme and the requirement of filing a declaration under Rule 57G was not viewed as defeating the benefit once the amended rule was in force when permission was granted. The Bench also held that the expression relating to inputs received immediately before the declaration should receive a liberal interpretation consistent with the purpose of the scheme.

Conclusion: The assessee was entitled to avail MODVAT credit, and the direction reversing the credit was not sustainable.

Ratio Decidendi: Where the governing transitional rule stands amended at the time permission for MODVAT credit is granted, and the duty-paid inputs satisfy the statutory conditions, the amended rule governs entitlement to credit and the benefit cannot be denied by applying the earlier restrictive version.

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