Modvat credit and exemption cannot be split for the same inputs when the notification bars credit.

An exemption notification that makes non-availment of Modvat credit an express condition cannot be combined with Modvat treatment for the same inputs and final products in the same factory and period. The manufacturer's attempt to split the same production line between exemption under Notification No. 69/86-C.E. and Modvat credit failed because the notification required duty-paid inputs and no prior credit under Rule 57G. The Board clarification cited by the assessee was confined to an end-use exemption and did not override the notification's own restriction. The principle in Chandrapur Magnet Wire applied only where already-taken credit was reversed before exemption was claimed. The appeals therefore failed.

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Issues: Whether the manufacturer could, in respect of the same inputs, same final products and same factory, avail Modvat credit for part of the production while claiming exemption under Notification No. 69/86-C.E. for the balance.

Analysis: The exemption under Notification No. 69/86-C.E. was conditional on the duty-paid character of the copper inputs and on no credit having been taken under the Modvat scheme. The scheme under Rule 57G contemplated a declaration for the inputs and final products intended to be covered under Modvat, and the record showed that the assessee sought to combine duty-paid exemption and Modvat treatment for the same product line during the same period. The Board clarification relied upon by the assessee dealt with an end-use exemption situation and not with an exemption that itself prohibited availment of Modvat credit. The principle in Chandrapur Magnet Wire applied only where credit already taken was reversed before claiming exemption, whereas the present case involved an attempt to split the same production between Modvat and exemption despite the express condition in the notification.

Conclusion: The manufacturer could not simultaneously avail Modvat credit and the exemption under Notification No. 69/86-C.E. for the same inputs and same final products during the same period. The claim for exemption was unavailable once Modvat credit was sought, and the appeals failed.

Ratio Decidendi: Where an exemption notification expressly makes non-availment of Modvat credit a condition, the assessee cannot partially claim exemption and partially take Modvat credit for the same inputs and final products in the same factory and period.

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