Modvat credit on molasses for VAM manufacture was restored for the pre-amendment period under Rule 57D.

Modvat credit on molasses used in manufacturing VAM was held admissible for the pre-amendment period because industrial alcohol emerged only as an intermediate product and Rule 57D, as it then stood, did not require the intermediate product to be separately specified under a Rule 57A notification. The later insertion of that condition by Notification No. 26/88 was treated as a substantive change, not a mere clarification, and it was not applied retrospectively. Following the earlier Special Bench view, the Tribunal restored the assessee's credit.

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Issues: Whether Modvat credit on molasses used in the manufacture of VAM is admissible where industrial alcohol emerges as an intermediate product and the period in dispute is prior to the amendment of the proviso to Rule 57D.

Analysis: The same controversy had already been decided by the Tribunal in a Special Bench decision construing Rule 57D as it then stood. The period involved was prior to the amendment brought in by Notification No. 26/88 dated 6-10-1988. The later insertion of an additional condition that the intermediate product must be specified as an input or final product under a notification issued under Rule 57A was treated as a substantive change, not a mere clarification, and there was no basis to apply it retrospectively. The Tribunal therefore followed the earlier Special Bench view and declined to differ from it.

Conclusion: Modvat credit could not be denied for the pre-amendment period, and the assessee was entitled to restoration of the credit.

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