Modvat credit utilisation: restored input credit can be used for declared final products when no one-to-one correlation is required.

Under the Modvat scheme, restored credit in RG 23A may be used to pay duty on declared final products where inputs are common and there is no one-to-one correlation between inputs and outputs. The only recognised restriction noted was where the final product is wholly exempt or chargeable at nil rate of duty under Rule 57C of the Central Excise Rules, 1944. The later proviso inserted by Notification No. 11/95 was not treated as barring such utilisation on the facts described, and the objection to using the restored credit was rejected.

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Issues: Whether credit restored to the RG 23A account after being wrongly availed on an undeclared final product could be utilised for payment of duty on the assessee's declared final products under the Modvat scheme.

Analysis: The issue turned on the nature of Modvat credit and the absence of a one-to-one correlation between inputs and final products. The declared and undeclared products used common inputs, and the only recognised restriction was where the final product was wholly exempt or chargeable to nil rate of duty under Rule 57C of the Central Excise Rules, 1944. The later proviso inserted by Notification No. 11/95 was not treated as excluding the claimed utilisation in the present facts.

Conclusion: The restored credit could be utilised towards payment of duty on the declared final products, and the objection to such utilisation was rejected.

Final Conclusion: The assessee was entitled to use the restored Modvat credit for discharge of duty on its declared products, and the appeal succeeded.

Ratio Decidendi: Under the Modvat scheme, where inputs are common and the final product is not wholly exempt or nil-rated, restored credit may be utilised for duty payment on an eligible declared final product because there is no required one-to-one correlation between inputs and final products.

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