Modvat declaration remains valid despite duty exemption when inputs, process and final product stay unchanged.

A validly filed Modvat declaration under Rule 57G continued to operate where the input, manufacturing process and final product remained unchanged, and there was no express rule providing that exemption from duty on the final product would automatically end the declaration. The assessee had not withdrawn from the Modvat scheme merely because duty on the final product was exempt for a period, so denial of credit on that basis was unjustified. The separate objection regarding clearances before approval was not examined because it had not been considered by the lower authorities.

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Issues: Whether a Modvat declaration filed under Rule 57G continued to remain valid after exemption from duty on the final product, and whether credit already taken could be denied on the ground that the assessee had ceased to be within the Modvat scheme.

Analysis: The declaration had been filed in 1986 and was never withdrawn. The input, manufacturing process, and final product remained unchanged, and the rules contained no express provision that an exemption from duty would automatically terminate an earlier declaration. The mere fact that duty on the scrap was withdrawn for a period did not mean that the assessee had opted out of the Modvat scheme or that the declaration had lost effect. The separate contention regarding clearances before approval was not examined, as it had not been dealt with by the lower authorities.

Conclusion: The declaration under Rule 57G remained valid, and denial of Modvat credit on the ground that the assessee had gone out of the scheme was not justified.

Final Conclusion: The departmental challenge failed, and the assessee's entitlement to credit was upheld on the ground that the original declaration continued to operate.

Ratio Decidendi: In the absence of an express statutory provision, exemption from duty on the final product does not terminate a validly filed Modvat declaration where the input, process, and product remain the same.

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