Accrued Modvat credit remains usable after withdrawal when the final product continues to attract duty.

Modvat credit earned on inputs while the facility was in force remained an accrued entitlement after withdrawal of the scheme, so long as the final product continued to be dutiable. Withdrawal of the facility did not extinguish credit already validly taken on earlier input receipts, and the credit could still be utilised for duty payment after the withdrawal date. Utilisation of the pre-withdrawal credit was therefore permissible in favour of the assessee.

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Issues: Whether Modvat credit validly taken on inputs before withdrawal of the facility could be utilised after the withdrawal for payment of duty on aerated water, which continued to be dutiable.

Analysis: The credit had been earned when the Modvat facility was in force. Withdrawal of the facility with effect from 1-10-1987 did not extinguish the credit already taken on earlier receipts of inputs. Since the final product remained dutiable and was not exempted, the credit represented an accrued entitlement that could still be used notwithstanding the later withdrawal notification.

Conclusion: The utilisation of the pre-withdrawal Modvat credit after 1-10-1987 was permissible. The issue is decided in favour of the assessee.

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