Modvat credit after withdrawal remains usable for duty payment unless the withdrawal notification expressly lapses prior credit.

Properly taken Modvat credit remained usable for payment of duty on eligible final products even after withdrawal of the facility, because the scheme allowed credit to form a common pool for offsetting duty and did not require one-to-one physical correlation between the inputs credited and the finished goods cleared. The right to utilise earlier credit would lapse only if the withdrawal notification expressly so provided. On that basis, accumulated deemed Modvat credit could still be applied to discharge duty on the notified final products, and the challenge to its utilisation was rejected.

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Issues: Whether deemed Modvat credit validly taken before withdrawal of the facility could still be utilised for payment of duty on final products cleared after withdrawal, and whether such utilisation was confined only to goods manufactured out of the very inputs on which the credit had originally been taken.

Analysis: Rule 57F(3) permits credit of duty on inputs to be utilised towards payment of duty on final products in relation to which the inputs are used. The Modvat scheme is intended to give instant credit and avoid cascading of duty, and it does not require a one-to-one correlation between particular inputs and particular final products. Once credit has been correctly taken and forms part of the assessee's credit pool, it remains available for utilisation unless the withdrawal notification itself provides that earlier credit would lapse. The Rules do not make it a condition that the very inputs on which credit was taken must be physically contained in the finished goods against which the credit is used.

Conclusion: The assessee was entitled to utilise the accumulated deemed Modvat credit after withdrawal of the facility, and the Revenue's objection failed.

Final Conclusion: The credit already earned and validly standing in the assessee's account could be used for discharge of duty on the notified final products, so the challenge to its utilisation was rejected.

Ratio Decidendi: Properly taken Modvat credit remains available for utilisation against duty on eligible final products even after withdrawal of the credit facility, unless the withdrawal notification expressly causes prior credit to lapse, and such utilisation does not depend on physical identity between the inputs originally credited and the final goods cleared.

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