Modvat credit and retrospectivity: de-recognized documents were fatal, but later administrative discretion could still be applied in pending matters.

Modvat credit was not allowed where the supporting certificate had already been de-recognized as a prescribed document, so the claim of Rs. 1,759 was rejected. Where credit of Rs. 7,491 was denied only because the officer's power to accept an alternative document was conferred later, that approach was unsustainable: an existing administrative discretion could be exercised in a pending matter, and the bar against retrospectivity did not apply to such procedural adjudication. The denial was set aside and the matter remanded for fresh consideration.

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Issues: (i) Whether Modvat credit of Rs. 1,759/- was admissible on the strength of a certificate that had been de-recognized as a prescribed document; (ii) Whether denial of Modvat credit of Rs. 7,491/- solely because the officer's discretionary power was conferred later in point of time was sustainable.

Issue (i): Whether Modvat credit of Rs. 1,759/- was admissible on the strength of a certificate that had been de-recognized as a prescribed document.

Analysis: The credit was claimed on the basis of a certificate issued after the document had already been de-recognized by Notification No. 16/94 (N.T.) with effect from the notified date. Once the document ceased to be a recognized basis for availment of credit, the claim could not be accepted on that footing.

Conclusion: The rejection of Modvat credit of Rs. 1,759/- was upheld and the finding was against the assessee.

Issue (ii): Whether denial of Modvat credit of Rs. 7,491/- solely because the officer's discretionary power was conferred later in point of time was sustainable.

Analysis: The power to permit credit on a document other than the specified documents, where the original document is stated to be missing, was treated as an administrative discretion to be exercised in the adjudication of the pending case. Such exercise was not barred merely because the cause of action had arisen earlier, since the rule against retrospectivity applies to substantive statutory changes and not to the exercise of an existing administrative power. The matter therefore required reconsideration by the adjudicating authority.

Conclusion: The denial of Modvat credit of Rs. 7,491/- was set aside and the matter was remanded for fresh consideration in favour of the assessee.

Final Conclusion: The appeal succeeded only in part, with one demand sustained and the other restored to the adjudicating authority for reconsideration.

Ratio Decidendi: An administrative discretion conferred for adjudication may be exercised in pending matters notwithstanding that the underlying cause arose earlier, and the principle against retrospectivity does not bar such exercise unless there is a substantive change in law.

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