Modvat credit on duty-paid inputs did not bar exemption under Notification No. 53/88 absent an express restriction.

Availing Modvat credit on duty-paid inputs did not, by itself, disentitle the assessee from exemption under Notification No. 53/88 where the notification contained no express prohibition or restriction. The duty-paid character of the inputs remained unchanged, and the reasoning in Rule 57F(4)(a) could not be imported into the notification to deny relief. The Tribunal's consistent view was that exemption could not be refused solely because Modvat credit had been taken, and the assessee was therefore entitled to the benefit.

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Issues: Whether availment of Modvat credit on inputs disentitles the assessee from claiming exemption under Notification No. 53/88 in the absence of any express prohibition or restriction in the notification.

Analysis: The duty-paid character of the inputs was not lost merely because Modvat credit had been taken. The exemption notification did not contain any prohibition or restriction denying the benefit on that ground. The reasoning underlying Rule 57F(4)(a) could not be imported into Notification No. 53/88, and the consistent view of the Tribunal was that exemption could not be denied solely because Modvat credit had been availed.

Conclusion: The assessee was entitled to the exemption benefit, and the department's challenge to the Collector (Appeals) failed.

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