Transitional Modvat credit on pre-declaration inputs is limited to actual duty paid, not higher notional credit.

Rule 57H of the Central Excise Rules, 1944 allowed transitional Modvat credit for inputs received before the Rule 57G declaration was acknowledged, but only to the extent of duty actually paid on those inputs. The provision did not extend the special higher notional credit available under Rule 57B for purchases from the small scale exempted sector. As Rule 57H was confined to preserving credit on pre-declaration stock evidenced by duty-paying documents, the higher notional credit was held inadmissible for such inputs and credit remained limited to actual duty paid; the Revenue's appeal succeeded.

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Issues: Whether, under Rule 57H of the Central Excise Rules, 1944, inputs lying in stock before filing the declaration under Rule 57G could qualify for higher notional credit available under Rule 57B, or whether credit was confined to the actual duty paid on such inputs.

Analysis: Rule 57A provided Modvat credit on the duty actually paid on inputs, while Rule 57B created a special incentive allowing higher notional credit for purchases from the small scale exempted sector. Rule 57H was a transitional provision enabling credit for inputs received before the dated acknowledgement of the Rule 57G declaration, but its language specifically referred to credit of the duty paid on the inputs. The transitional provision was meant to preserve credit for pre-declaration stock and not to extend the special higher notional credit contemplated by Rule 57B. Accordingly, the benefit under Rule 57H was limited to the duty actually paid as evidenced by the duty-paying documents.

Conclusion: The higher notional credit was not admissible under Rule 57H for pre-declaration inputs. Credit was confined to the actual duty paid, and the Revenue's appeal succeeded.

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