Modvat credit for leased capital goods depends on acquisition before the notification, not later declaration or commissioning.

Notification No. 27/94-NT was treated as enlarging the Modvat scheme by extending credit to capital goods acquired on lease, hire-purchase or loan, so it was not merely clarificatory and did not operate retrospectively. The entitlement turned on when the goods were "acquired"; for leased or loaned capital goods, acquisition was complete when the transaction was concluded and the goods reached the assessee's premises. Later filing of the declaration, installation, or commissioning did not create a substantive right to credit. Rule 57Q(2) was held not to extend entitlement to such goods under the later notification.

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Issues: (i) Whether Notification No. 27/94-NT dated 17-6-1994, which extended Modvat credit to capital goods acquired on lease, hire-purchase or loan, was clarificatory and retrospective in operation. (ii) Whether Modvat credit was available where the capital goods were received before the notification but the declaration was filed and the machinery was installed and commissioned after the notification. (iii) Whether Rule 57Q(2) applied to such leased or loaned capital goods.

Issue (i): Whether Notification No. 27/94-NT dated 17-6-1994, which extended Modvat credit to capital goods acquired on lease, hire-purchase or loan, was clarificatory and retrospective in operation.

Analysis: The notification enlarged the existing Modvat scheme by creating a new entitlement for capital goods not outright purchased but acquired under lease, hire-purchase or loan arrangements. Such an expansion conferred a substantive benefit and did not merely explain an already existing position. A notification introducing a new benefit cannot be treated as clarificatory unless it only removes ambiguity in the earlier scheme.

Conclusion: The notification was not clarificatory and did not operate retrospectively.

Issue (ii): Whether Modvat credit was available where the capital goods were received before the notification but the declaration was filed and the machinery was installed and commissioned after the notification.

Analysis: The operative expression in the notification was "acquired". For leased or loaned capital goods, acquisition was complete when the transaction was concluded and the goods reached the assessee's premises. The filing of the declaration was only a procedural pre-condition and could not create the substantive right to credit. Since the goods were already acquired and received before the notification came into force, later installation, commissioning, or filing of declaration did not alter the position.

Conclusion: Modvat credit was not available on the facts of the case.

Issue (iii): Whether Rule 57Q(2) applied to such leased or loaned capital goods.

Analysis: Rule 57Q(2) was held to govern the original Modvat scheme for capital goods purchased outright and its cut-off date did not extend to the later notification that expanded the scheme to leased, hired or loaned goods. Accordingly, the rule did not assist the appellant.

Conclusion: Rule 57Q(2) did not support entitlement to credit in the present case.

Final Conclusion: The denial of Modvat credit was upheld and the appeal failed on merits.

Ratio Decidendi: A notification that enlarges an existing duty-credit scheme by conferring a new substantive benefit is not clarificatory, and entitlement under it arises when the statutory condition of acquisition is completed before the notification, not from later procedural steps.

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