Modvat credit on common inputs may be cross-utilised across declared dutiable final products without strict one-to-one correlation.

Modvat credit on common inputs may be cross-utilised against duty on different declared dutiable final products without insisting on one-to-one correlation or quantum-wise apportionment. The Tribunal relied on earlier decisions and held that such utilisation was permissible under the scheme. Separately, demands covered by the first two show cause notices were remanded because a chart said to show that the disputed credit was not used for clearing the final product had not been examined, so the matter required fresh consideration after hearing the assessee.

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Issues: (i) Whether the demands covered by the first two show cause notices required remand for reconsideration of the chart said to show that the disputed credit was not used for clearing the final product; (ii) Whether cross utilisation of Modvat credit earned on common inputs for clearance of different dutiable final products was permissible.

Issue (i): Whether the demands covered by the first two show cause notices required remand for reconsideration of the chart said to show that the disputed credit was not used for clearing the final product.

Analysis: The chart placed on record was said to indicate that the CVD credit on HDPE granules had not been utilised for clearing master batches. That material was not examined by the appellate authority, and the resulting finding was therefore not based on the full record. The matter on those demands required fresh consideration after examination of the chart and hearing the assessee.

Conclusion: The issue was remanded for fresh decision in accordance with law.

Issue (ii): Whether cross utilisation of Modvat credit earned on common inputs for clearance of different dutiable final products was permissible.

Analysis: The dispute was governed by the principle that, under the Modvat scheme, credit on common inputs need not be linked on a strict one-to-one basis with each final product. Where the inputs and outputs are declared and the credit relates to common inputs used for dutiable final products, apportionment by quantum-wise accountal is not required. Following the earlier Tribunal decisions relied upon, the assessee was entitled to use the credit across final products covered by the scheme.

Conclusion: Cross utilisation of credit on common inputs was held permissible.

Final Conclusion: The appeal succeeded to the extent that one set of demands was sent back for reconsideration, while the remaining issue was decided in favour of the assessee on the permissibility of cross utilisation of Modvat credit.

Ratio Decidendi: Under the Modvat scheme, credit on common inputs may be utilised towards duty on any declared dutiable final product without insisting on one-to-one correlation, and a failure to examine material evidence warrants remand.

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