Modvat credit reversal preserved concessional excise exemption where credit was not utilised and the register entry was removed.

Concessional central excise duty under Notification No. 193/86-C.E. was available where the final product fell within the specified tariff sub-heading, and the mere entry of Modvat credit in the register did not by itself defeat the exemption. The decisive point was that the credit had not been utilised; once the entry was reversed and removed from the Modvat register, the condition that no credit had been availed of was treated as satisfied. The exemption therefore remained available after reversal of the credit, rather than being denied solely because credit had initially been recorded.

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Issues: Whether the assessee was entitled to the concessional rate of central excise duty under Notification No. 193/86-C.E. despite having taken Modvat credit on duty paid inputs, and whether reversal of such credit restored the exemption benefit.

Analysis: The benefit of the notification was available when the final product was classifiable under the specified tariff sub-heading. The only impediment relied upon by the department was that credit on the duty paid coffee had been entered in the Modvat register, which was treated as availing of credit. The Tribunal noted that the credit had not been utilised and that, following reversal and removal of the entry from the Modvat register, the assessee would satisfy the condition that no credit had been availed of for the purposes of the notification.

Conclusion: The assessee was entitled to the concessional rate of duty after reversal of the Modvat credit, and the exemption could not be denied on the basis of the mere taking of credit in the register.

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