Modvat credit on paper for computer stationery remained capped under the amended exemption notification, restoring the lower credit limit.

Modvat credit on paper used to manufacture computer stationery was governed by Notification No. 177/86 as amended by Notification No. 149/87, which restricted credit on paper and paper board to Rs. 800 per ton in the specified circumstances. The earlier question whether the final product was exempt under Notification No. 43/86 did not make the credit cap irrelevant, because no prior determination showed that credit was unavailable altogether. In the absence of such a finding, the credit had to be regulated under the applicable notification. The higher credit allowed by the appellate authority was therefore not justified, and the original order limiting credit was restored.

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Issues: Whether Modvat credit on paper used in the manufacture of computer stationery was limited to Rs. 800 per ton under the amended exemption notification.

Analysis: Notification No. 177/86, as amended by Notification No. 149/87, restricted credit on paper and paper board to Rs. 800 per ton in the specified circumstances. The question whether the final product was exempt under Notification No. 43/86 was not decided in the earlier appeal and could not render the credit restriction academic unless it was first shown that no credit was legally available at all. In the absence of such a determination, the credit had to be regulated according to the governing notification.

Conclusion: The credit was limited to Rs. 800 per ton and the Collector (Appeals) was not justified in permitting a higher credit.

Final Conclusion: The departmental appeal succeeded, the appellate order was set aside, and the original assessment order restricting credit was restored.

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