Modvat credit lapses on opting for exemption and cannot be revived for later dutiable clearances.

Credit accumulated under the Modvat scheme was treated as having lapsed when the assessee opted for full exemption and cleared final products without duty. The Tribunal followed the view that such balance credit in R.G. 23C Part II could not be carried forward for later use after the exemption limit was crossed and dutiable clearances resumed. The operative result was that the accumulated credit could not be utilised subsequently, and the revenue's objection succeeded.

---

---

Issues: Whether the balance Modvat credit standing in R.G. 23C Part II on the date the assessee opted out of the Modvat scheme and moved under the small scale exemption could be utilised after the exemption limit was crossed and duty payment resumed.

Analysis: The respondents had availed Modvat credit on capital goods, then opted for full exemption under Notification No. 1/93 dated 28-2-1993. On opting out of the credit scheme while clearing final products without duty, the remaining credit balance was treated as having lapsed. The Tribunal followed the view that credit taken for goods cleared without payment of duty cannot be carried forward for later use after the exemption threshold is crossed.

Conclusion: The balance credit could not be utilised later and the revenue's objection succeeded.

Final Conclusion: The order allowing utilisation of the accumulated credit was set aside and the revenue appeal was allowed.

Ratio Decidendi: Credit accumulated under a duty exemption regime lapses on opting out of the Modvat scheme and cannot be revived for subsequent utilisation after the assessee resumes dutiable clearances.

---