Modvat credit under Rule 57Q denied for capital goods used in producing a marketable intermediate product without retrospective notification relief.

Modvat credit under Rule 57Q was treated as unavailable for capital goods used in manufacturing cotton yarn where cotton carded/combed emerged as a marketable intermediate product falling within the rule's exclusion. The Tribunal also held that Notification No. 60/94 contained no indication of retrospective operation and could not be applied to earlier periods. It followed the earlier two-Member view on marketability of the intermediate product, declined to reopen additional submissions, and applied the coordinate Bench decision on the facts before it. The departmental challenge was therefore accepted and the credit claim rejected.

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Issues: Whether Modvat credit under Rule 57Q was admissible on the capital goods used in the manufacture of cotton yarn when cotton carded/combed emerged as an intermediate product and whether Notification No. 60/94 could be applied retrospectively.

Analysis: The Tribunal followed the earlier two-Member decision holding that cotton carded/combed was a marketable intermediate product and that machinery used for obtaining such goods was hit by the exclusion under Rule 57Q. It also accepted that Notification No. 60/94 contained no indication of retrospective operation and therefore could not be applied to prior periods. The Tribunal declined to reopen additional submissions and treated the later coordinate Bench decision as binding on the facts before it.

Conclusion: Modvat credit on the disputed capital goods was not admissible, and the Department's appeal succeeded.

Final Conclusion: The assessee was denied the credit claimed on the capital goods used in the relevant manufacturing process, and the departmental challenge was accepted.

Ratio Decidendi: Where capital goods are used in producing a marketable intermediate product, Modvat credit is unavailable if the applicable notification is not retrospective and the governing rule excludes such goods.

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