Accrued Modvat credit survives withdrawal of the final product from the scheme where no express lapse rule exists.

Accrued Modvat credit on inputs lying unutilised could not be treated as lapsed merely because the final product was withdrawn from the scheme. The governing principle applied was that a right validly accrued under a statutory scheme is not taken away retrospectively unless the law expressly so provides. The absence of any specific Modvat rule authorising lapse or recovery of already earned credit supported continued utilisation of that credit. The demand for reversal was therefore set aside, and relief was granted to the assessee on that issue.

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Issues: Whether credit of duty already earned under the Modvat scheme on inputs lying unutilised could be denied or treated as lapsed merely because the final product was withdrawn from the scheme.

Analysis: The governing principle applied was that a right validly accrued under the statutory scheme cannot be taken away retrospectively unless the law expressly so provides. The withdrawal of the final product from the Modvat scheme did not, by itself, extinguish the right to utilise credit already earned on inputs. The reasoning followed earlier authority holding that rescission of the notification bringing the benefit into existence does not automatically destroy the accrued right to use the credit, particularly where no specific provision authorises recovery or lapse of such credit. The absence of a specific recovery provision under the Modvat rules for credit already earned and lying unutilised supported this view.

Conclusion: The demand for reversal of the Modvat credit was set aside and relief was granted to the assessee on that issue.

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