Modvat credit rights and non obstante clauses: retrospective time limits could not defeat credit, and Rule 57J prevailed.

An amendment inserting a six-month limit in Rule 57G was treated as prospective only, so it could not be used to deny Modvat credit on an invoice issued before the amendment. Rule 57J, containing a non obstante clause, was held to override the time restriction in Rule 57G for intermediate goods received from job workers, because no time limit then applied under Rule 57J. The denial of credit was therefore unsustainable, and consequential relief followed.

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Issues: (i) Whether the amendment inserting a six-month time limit in Rule 57G could be applied retrospectively to deny Modvat credit on an invoice issued before the amendment. (ii) Whether Rule 57J, containing a non obstante clause, overrode the time limit in Rule 57G so that credit could be taken on receipt of intermediate goods from job workers.

Issue (i): Whether the amendment inserting a six-month time limit in Rule 57G could be applied retrospectively to deny Modvat credit on an invoice issued before the amendment.

Analysis: The amendment by Notification No. 28/95 came into force on 29-6-1995. The credit claim related to an invoice dated 30-11-1994, and the reasoning accepted that a pre-existing right to take Modvat credit could not be curtailed unless the amendment expressly or by necessary implication had retrospective effect. The Tribunal relied on its earlier view that the amended time limit operated prospectively only.

Conclusion: The amendment to Rule 57G was not retrospectively applicable to the assessee.

Issue (ii): Whether Rule 57J, containing a non obstante clause, overrode the time limit in Rule 57G so that credit could be taken on receipt of intermediate goods from job workers.

Analysis: The goods were received under Rule 57J after the invoice date, and at the relevant time Rule 57J did not prescribe any time limit. Given the opening non obstante phrase, Rule 57J was treated as having overriding effect over Rule 57G. On that basis, the time restriction in Rule 57G could not defeat credit otherwise available under Rule 57J.

Conclusion: Rule 57J prevailed over Rule 57G, and denial of credit on the basis of the six-month limit was unjustified.

Final Conclusion: The denial of Modvat credit was unsustainable, and the assessee was entitled to consequential relief.

Ratio Decidendi: A vested Modvat credit right existing before an amendment cannot be taken away retrospectively unless the amendment clearly so provides, and a rule framed with a non obstante clause will override a conflicting time restriction in another rule where no such limit then existed.

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