Deemed Modvat credit cannot be denied by importing a non-duty-paid restriction absent from the governing order.

Deemed Modvat credit under the 01-03-1994 Ministry of Finance order could not be denied merely because the inputs were scrap said to be clearly recognisable as non-duty paid. The order was read as containing only its express conditions: the re-rollable materials had to be used without melting, purchased from outside, and in stock on or after 01-04-1994. Rule 57G's second proviso permitted denial only for stocks lying in a factory, customs area, or warehouse, and no such excluded location was shown. As the order itself did not add a non-duty-paid restriction, the credit was held admissible and the contrary view was set aside.

---

---

Issues: Whether deemed Modvat credit under the Ministry of Finance order dated 01-03-1994 could be denied on the ground that the inputs were scrap clearly recognisable as non-duty paid.

Analysis: The order granting deemed credit was construed as containing only the conditions expressly stated therein, namely that the re-rollable materials should be used without melting and should have been purchased from outside and in stock on or after 01-04-1994. Rule 57G was read with its second proviso to mean that the Government could deem inputs duty paid except stocks lying in a factory, customs area, or warehouse, which are treated by the rule itself as clearly recognisable as non-duty paid. Since the disputed inputs were not shown to be in any of those excluded places, and the relevant 01-03-1994 order did not add a non-duty-paid restriction, the credit could not be denied on that basis. Earlier Tribunal decisions allowing such credit under the same order were followed.

Conclusion: The denial of deemed Modvat credit was unsustainable and the assessee was entitled to the credit.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where a deemed credit order prescribes specific conditions and omits any restriction based on the inputs being clearly recognisable as non-duty paid, such a restriction cannot be imported from the general rule to deny credit unless the inputs fall within the express exclusions in the rule itself.

---