Modvat credit follows the assessee's chosen exemption when multiple exemptions are available and the revenue cannot override that choice.

Modvat credit on HDPE and polypropylene granules used to manufacture toner bottles was admissible where the assessee was eligible for more than one exemption and chose the more beneficial notifications. The department could not deny credit by insisting on Notification No. 217/86 merely because the bottles and caps were captively consumed and might otherwise have been exempt. The operative principle is that an assessee may lawfully opt for the exemption that is more beneficial, and the revenue cannot compel a different exemption to defeat consequential credit. Tribunal precedent supported this approach, and the credit claim was allowed.

---

---

Issues: Whether Modvat credit on HDPE and polypropylene granules used in the manufacture of toner bottles was admissible when the bottles and caps were captively consumed and the department relied on exemption under Notification No. 217/86.

Analysis: The use of HDPE and polypropylene granules in the manufacture of toner bottles was not in dispute. The only objection was that the captively consumed bottles would be exempt under Notification No. 217/86 and, therefore, credit on inputs used in their manufacture was not available. The Court held that where two exemptions are available, the assessee is entitled to choose the more beneficial exemption. Since the appellants had opted for the benefit of Notification Nos. 53/88 and 14/92, the department could not compel the application of Notification No. 217/86 to deny credit. The Tribunal's earlier decisions on the same principle supported this view.

Conclusion: Modvat credit was admissible and the denial of credit was unsustainable; the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with the assessee held entitled to the credit claimed.

Ratio Decidendi: When an assessee is eligible for more than one exemption, it may lawfully opt for the exemption that is more beneficial, and the revenue cannot deny consequential credit by insisting on a different exemption.

---