Transitional Modvat credit allowed where inputs in stock were used after the scheme change and statutory conditions were satisfied.

Transitional Modvat credit was available under Rule 57H after the shift from proforma credit under Rule 56A, even though the declaration was filed later, because the rule covers inputs in stock or received after filing where the final products are cleared on or after 1-3-1987. The expression "immediately" was not read narrowly in isolation, as the object of the provision was to preserve credit eligibility during the transition once the statutory conditions were met. On that reasoning, credit was admissible for duty-paid inputs lying in stock and used in manufacture during the relevant post-1-3-1987 period.

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Issues: Whether the assessee was entitled to Modvat credit under the transitional provisions after the rescission of the earlier proforma credit notification, notwithstanding the fact that the declaration was filed later.

Analysis: The assessee had been availing proforma credit under Rule 56A when the scheme was replaced by Modvat with effect from 1-3-1987. Rule 57H permits credit of duty paid on inputs received immediately before the dated acknowledgement of declaration where the inputs are in stock or are received after filing of the declaration, and also where such inputs are used in the manufacture of final products cleared on or after 1-3-1987. The expression "immediately" was held not to be read in isolation, because the object of the rule is to give effect to the transitional availability of Modvat credit once the statutory conditions are satisfied. Since the final products made out of the inputs were cleared on or after 1-3-1987, the transitional benefit was attracted.

Conclusion: The assessee was entitled to Modvat credit for the duty paid on inputs lying in stock and used between 1-3-1987 and 27-9-1987.

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