Modvat credit adjustment under Rules 57A and 57E raised a referable question of law on retrospective amendment

The text examines whether the interrelation of Rule 57A and the unamended Rule 57E permitted upward adjustment of Modvat credit when additional duty on inputs was paid later, or whether Rule 57E confined adjustments to downward variation tied to refunds. It notes conflicting Tribunal views and the subsequent amendment described as clarificatory, leading to the view that the issue involved questions of law on the scope and effect of the two rules, including possible retrospective operation of the amendment. The matter was therefore treated as fit for reference to the High Court under Section 35G.

---

---

Issues: Whether questions of law arose from the Tribunal's order warranting reference to the High Court under Section 35G; and whether the disputed adjustment of Modvat credit under Rule 57E, in relation to Rule 57A, raised a referable question of law.

Analysis: The application concerned the admissibility of upward variation of Modvat credit where additional duty on inputs was paid subsequently, and the rival stands turned on whether Rule 57E, as it stood before amendment, confined adjustment only to downward variation linked to refund, or whether Rule 57A supplied the substantive basis for credit so that Rule 57E could not defeat it. The Tribunal noted conflicting views in earlier orders and also the subsequent amendment of Rule 57E said to be clarificatory. In view of the divergence of views and the legal issue concerning the interrelation of the two rules and the retrospective effect of the amendments, the matter was held to involve questions of law fit for reference.

Conclusion: The questions of law were referred to the High Court for opinion under Section 35G, in favour of the Revenue's reference application.

---