Modvat credit cut-off under transitional rules depends on duty payment date, not the departmental circular alone.

Rule 57G circular only dispensed with production of duty-paying documents and did not itself fix a cut-off date for deemed Modvat credit; the transitional limit had to be derived from Rule 57H. Under Rule 57H(2), credit was not admissible where duty had already been paid on or before 31-1-1986, so purchases made on or before that date were barred from credit. For purchases made after 31-1-1986, entitlement depended on whether duty had in fact been paid on or before that date, requiring factual verification before denying the benefit.

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Issues: Whether deemed Modvat credit under the departmental circular could be granted for inputs purchased before and after 31-1-1986, and whether Rule 57H imposed a cut-off date limiting such credit.

Analysis: The circular issued under Rule 57G dispensed only with production of duty-paying documents and did not itself create a cut-off date. The cut-off date had to be gathered from the transitional scheme under Rule 57H. Sub-rule (2) made it clear that no Modvat credit was admissible where duty had been paid on or before 31-1-1986, even if the goods were otherwise covered by the Modvat scheme. For purchases made after 31-1-1986, the revenue was required to enquire whether duty had in fact been paid on or before that date before denying the benefit. For purchases made on or before 31-1-1986, credit was not admissible.

Conclusion: Modvat credit was barred for purchases made on or before 31-1-1986, while the matter relating to purchases made after that date was remanded for factual enquiry into the date of duty payment.

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