Deemed Modvat credit on re-rollable materials turns on the exact wording of the applicable credit order.

Specific deemed-credit orders for re-rollable materials were applied according to their plain terms, and the exclusion for inputs recognisable as non-duty paid, wholly exempt, or nil-rated could not be read into them by interpretation; credit was therefore admissible under those orders. For the period up to 1-4-1987, however, the general deemed-credit order for iron and steel expressly barred credit where inputs were clearly recognisable as non-duty paid or exempt, and that prohibition remained operative in the absence of proof of duty-paid character; credit was accordingly not admissible for that earlier period.

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Issues: (i) Whether deemed Modvat credit was admissible on re-rollable materials under the specific Government orders governing re-rollers when those orders contained no clause denying credit to inputs that were clearly recognisable as non-duty paid or exempt; and (ii) whether, for the period prior to 1-4-1987, credit could be denied under the general deemed-credit order applicable to iron and steel on the ground that the inputs were clearly recognisable as non-duty paid or exempt.

Issue (i): Whether deemed Modvat credit was admissible on re-rollable materials under the specific Government orders governing re-rollers when those orders contained no clause denying credit to inputs that were clearly recognisable as non-duty paid or exempt.

Analysis: The specific deemed-credit orders for re-rollable materials were treated as separate and distinct from the general order for iron and steel. The order applicable to re-rollers allowed credit on ingots and re-rollable materials used without undergoing the process of melting for manufacture of goods under Chapters 72 or 73, and it did not contain the restrictive clause found in the general order. In the absence of such a restriction, the exclusion for inputs recognisable as non-duty paid, wholly exempt, or nil-rated could not be imported by interpretation. The credit scheme had to be applied according to the plain language of the order, and the legal fiction created by the order could not be curtailed by reading in words that were not there.

Conclusion: Deemed credit was admissible to the assessees under the re-rollable material orders, and the denial of credit on that basis was unsustainable.

Issue (ii): Whether, for the period prior to 1-4-1987, credit could be denied under the general deemed-credit order applicable to iron and steel on the ground that the inputs were clearly recognisable as non-duty paid or exempt.

Analysis: For the earlier period, no separate deemed-credit order for re-rollable materials was in force, and the general order governing iron and steel applied. That order expressly barred credit where inputs were clearly recognisable as non-duty paid, wholly exempt, or charged to nil rate of duty. In the absence of evidence that the inputs had suffered duty, the prohibition operated. The later separate order for re-rollable materials could not be used to extend credit retrospectively for the earlier period.

Conclusion: Credit was not admissible for the period up to 1-4-1987, and the departmental appeal succeeded to that extent.

Final Conclusion: The appeals of the assessees succeeded on the re-rollable material orders, while the departmental appeal succeeded only for the pre-1-4-1987 period under the general order; the matter was disposed of accordingly.

Ratio Decidendi: Where a specific deemed-credit order for re-rollable materials omits the usual exclusion for inputs recognisable as non-duty paid or exempt, that exclusion cannot be read into the order by interpretation; conversely, an express exclusion in a general deemed-credit order remains enforceable where no separate re-roller order applies.

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