Broad interpretation of Modvat credit rules allows export-linked credit use for similar home-consumption goods.

Export-linked Modvat credit accumulated on inputs used in final products cleared under bond could be utilised for duty on similar goods cleared for home consumption, and any unutilised credit was treated on the basis recognised for export accumulation. The Tribunal read Rule 57F(3) broadly, holding that "similar" does not mean identical and that strict one-to-one correlation was unnecessary where the products answered the same description and tariff heading. Relying on the assessee's earlier case and the principle permitting cash refund of unutilised credit, it held the demand unsustainable and set aside the impugned order with consequential relief.

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Issues: Whether accumulated Modvat credit earned on inputs used in exported final products could be utilised, or refunded in cash if unutilised, for payment of duty on similar final products cleared for home consumption.

Analysis: The Tribunal held that Rule 57F(3) permits utilisation of credit in respect of similar final products cleared for home consumption where the inputs were used in final products cleared for export under bond. The expression "similar" was read broadly and not as meaning identical. The Tribunal found that export-related accumulation of credit stands on a special footing and that there is no requirement of strict one-to-one correlation so long as the products answer to the same description and fall under the same tariff heading. The earlier order in the appellants' own case and the decision recognising cash refund of unutilised credit supported this view.

Conclusion: The demand was unsustainable and the impugned order was liable to be set aside. The appeals were allowed with consequential relief.

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