Job-work Modvat credit: cut-off date notification cannot override the Rule 57F(3) procedure for intermediate goods.

Modvat credit could not be denied merely because the credit was taken after 30-6-1994 where the inputs moved under the job-work procedure in Rule 57J and Rule 57F(3). The prescribed movement through subsidiary challans under Rule 57F(3) read with Notification No. 351/86 governed the transaction, and Notification No. 16/94-C.E. (N.T.) could not override that procedural framework by imposing a cut-off date for documents issued before 1-4-1994. As no time limit for return of intermediate products from the job worker was provided under Rule 57F, the notification was held inapplicable to deny credit.

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Issues: Whether Modvat credit could be denied on the ground that the credit was taken after 30-6-1994 in a case governed by the job-work procedure under Rule 57J and Rule 57F(3), notwithstanding Notification No. 16/94-C.E. (N.T.).

Analysis: The dispute turned on whether the time-limit contemplated by Notification No. 16/94-C.E. (N.T.) controlled credits taken in respect of intermediate processed goods received through the prescribed job-work procedure. The lower appellate authority found that the goods had moved under subsidiary challans in accordance with Rule 57F(3) read with Notification No. 351/86 issued under Rule 57J, and that the notification prescribing a cut-off date for documents issued prior to 1-4-1994 could not override the procedural framework governing job work, especially when no time limit for return of intermediate products from the job worker was provided under Rule 57F.

Conclusion: The notification did not apply so as to deny Modvat credit in the facts of the case, and the credit was admissible.

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