Modvat credit reversal on mixed-clearance inputs raised a referable question of law under the rule framework.

Modvat credit on inputs used in goods partly cleared on payment of duty and partly cleared without payment of duty was examined for whether Rule 57C required reversal of credit. The Tribunal stated that credit was taken under Rule 57A read with Rule 57G and utilised under Rule 57F, and that no specific provision in the Modvat rules mandated reversal in that contingency. Because a contrary view existed from another Bench and the interaction of Rules 57A, 57C and 57F had to be considered, the matter was treated as raising a question of law fit for reference to the High Court rather than a merits determination.

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Issues: Whether, on the facts relating to Modvat credit on inputs used in goods partly cleared on payment of duty and partly cleared without payment of duty, a question of law arose for reference regarding the applicability of Rule 57C and the need for reversal of credit.

Analysis: The Tribunal had taken the view that Modvat credit was correctly taken under Rule 57A read with Rule 57G and correctly utilised under Rule 57F, and that no reversal was contemplated because the Modvat Rules contained no specific provision requiring reversal in such a contingency. It was noted that the Department relied on a contrary view of another Bench, and that the scope of Rule 57C had to be considered with Rule 57A and Rule 57F. In that context, and in view of the divergence of views, the matter was held to raise a question of law fit for reference.

Conclusion: A question of law did arise, and the reference to the High Court was made on the stated issue.

Final Conclusion: The order does not decide the substantive Modvat entitlement on merits but sends the legal question for decision by the High Court.

Ratio Decidendi: Where the applicability of a Modvat reversal provision depends on the interaction of the relevant rules and there is a conflicting view on the point, the issue may constitute a referable question of law rather than a settled merits determination.

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