Modvat credit on capital goods follows Rule 57Q read with Rule 57S; later Tribunal interpretation prevails over earlier contrary view.

Modvat credit on capital goods was examined under Rule 57Q read with Rule 57S, and eligibility was held to depend on the combined reading of those provisions. The later Tribunal view in M.M. Forgings, based on the Supreme Court's ruling in Rajasthan State Chemicals Works, was treated as the governing interpretation, while the earlier contrary view in Velathal Spinning Mills was not regarded as the settled position. A pending reference before the High Court did not suspend the legal force of the later Tribunal ruling. On that basis, credit on the disputed items was sustained and the Revenue challenge failed.

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Issues: Whether modvat credit on the 12 disputed items of capital goods was admissible under Rule 57Q read with Rule 57S, and whether the later Tribunal decision in M.M. Forgings governed the issue notwithstanding an earlier contrary decision and a pending reference before the High Court.

Analysis: The appeal turned on the correct view of the Tribunal's conflicting decisions. The later decision in M.M. Forgings held, on the strength of the Supreme Court's ruling in Rajasthan State Chemicals Works, that Rule 57Q must be read with Rule 57S for determining eligibility to modvat credit on capital goods. The earlier contrary view in Velathal Spinning Mills was treated as not representing the settled position, particularly because the later decision in M.M. Forgings was not before the Bench in the subsequent contrary order. A pending reference petition before the High Court did not detract from the operative value of the M.M. Forgings decision, which remained good law and had been followed consistently.

Conclusion: The credit on the disputed items was rightly allowed and the Revenue's challenge failed.

Final Conclusion: The order-in-appeal allowing modvat credit on the 12 items was sustained, and the Revenue appeal was rejected.

Ratio Decidendi: Where a later Tribunal decision, founded on Supreme Court authority, has settled the interpretation of the relevant credit provisions, that later view prevails over an earlier contrary order, and a pending challenge to that later decision does not suspend its legal force.

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