Interpretation of tax exemption order created a referable question of law on deemed Modvat credit beyond clearance limits.

Where the governing Ministry's order on deemed Modvat credit for a small-scale unit after crossing the aggregate clearance limit was reasonably capable of two interpretations, a referable question of law arose. The legal position was treated as unclear on the availability of credit beyond the specified threshold, so the High Court's consideration was required. The application for reference was therefore allowed, without deciding the underlying entitlement to credit.

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Issues: Whether a point of law arose for reference on the question whether deemed Modvat credit was available to a small scale unit after crossing the aggregate value of clearances of Rs. 75 lakhs.

Analysis: The relevant Ministry's Order was found capable of two interpretations. On that basis, the legal position regarding the availability of deemed Modvat credit after the specified clearance limit was not clear, and the issue required consideration by the High Court.

Conclusion: A point of law was held to arise for reference, and the reference application was allowed.

Final Conclusion: The matter was not decided on the underlying credit entitlement, but only on the existence of a referable question of law, resulting in a procedural allowance of the application.

Ratio Decidendi: Where the governing notification or order is reasonably capable of more than one interpretation on a material tax issue, a referable question of law arises for consideration by the High Court.

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