Modvat credit under a special rule prevails over a general notification restriction when the two are inconsistent.

Rule 57B, as a special Modvat provision with a non obstante clause, prevails over the general restriction on credit contained in Notification No. 177/86 issued under Rule 57A. Because the denial of credit rested only on that notification, and the notification could not override the specific language of Rule 57B, the restriction was inapplicable to the assessee's claim. The disputed Modvat credit was therefore allowable, and the demand based on the notification was unsustainable.

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Issues: Whether Rule 57B of the Central Excise Rules, 1944, with its non obstante clause, overrides the restriction on Modvat credit contained in Notification No. 177/86 dated 1-3-1986 issued under Rule 57A of the Central Excise Rules, 1944.

Analysis: Rule 57A forms the general framework of the Modvat scheme, but Rule 57B is a special provision dealing with credit in relation to inputs purchased from SSI units. The non obstante clause in Rule 57B was read as giving overriding effect at least in respect of the credit of duty amount. Since the denial of credit was founded only on Notification No. 177/86, and that notification was issued under Rule 57A, its restriction could not prevail against the specific overriding language of Rule 57B. The demand was therefore unsustainable.

Conclusion: The restriction in Notification No. 177/86 did not apply so as to deny the Modvat credit claimed by the assessee.

Final Conclusion: The assessee was entitled to the disputed Modvat credit and the demand set aside by the Tribunal could not be sustained.

Ratio Decidendi: A special provision in the Modvat scheme containing a non obstante clause prevails over a general restriction imposed under a notification issued under the general rule, to the extent of the inconsistency.

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