Modvat credit on inter-plant transfers under bond required High Court reference where conflicting views existed on fiscal scheme interpretation.

Interpretation of Modvat credit under Notification No. 217/86-C.E., as amended by Notification No. 97/89-C.E., was treated as a question of law requiring authoritative determination because a different Bench had taken a contrary view. The Tribunal noted that intermediate inputs moved under bond from one unit to another, and that final products in the recipient unit were cleared on payment of duty; on that basis, denial of Modvat credit on the basic inputs was considered unjustified in the earlier view. As the dispute involved fiscal scheme construction and conflicting judicial opinions, the reference applications were allowed and the questions of law were referred to the High Court.

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Issues: Whether the Revenue's reference applications under section 35G were to be allowed on the question whether Modvat credit on basic inputs could be denied for inter-plant removal of intermediate inputs under Notification No. 217/86-C.E. as amended by Notification No. 97/89-C.E.

Analysis: The Tribunal had earlier held that where intermediate inputs were moved from one unit to another under bond and the ultimate final products in the other unit were cleared on payment of duty, denial of Modvat credit on the basic inputs was not justified. It treated Notification No. 217/86-C.E. as part of the Modvat scheme, considered the amendment by Notification No. 97/89-C.E. as intended to facilitate inter-plant transfers without interrupting the credit chain, and noted that a different view had been taken by another Bench. Since the issue involved interpretation of law and a differing view existed, the Tribunal held that the matter required reference to the High Court.

Conclusion: The reference applications were allowed and the questions of law were referred to the High Court.

Ratio Decidendi: Where a question turns on interpretation of a fiscal scheme and another Bench has taken a different prima facie view, the Tribunal must make a reference under section 35G if the issue is one of law requiring authoritative determination.

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