Modvat credit for capital goods cannot revive a rejected input claim, while eligible input credit remains available.

Modvat credit on ceramic evaporation boats was not available as capital goods because the goods had already been held ineligible as inputs, and the alternative capital goods basis had not been raised before the Larger Bench. By contrast, boron nitrate suspension used in manufacturing metallised polyester film was treated as an eligible input, so credit was allowed on that item. The commentary records that credit was therefore disallowed for ceramic evaporation boats but sustained for boron nitrate suspension, leaving the relief limited to the latter.

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Issues: (i) Whether ceramic evaporation boats could be treated as capital goods for the purpose of Modvat credit when they had been denied eligibility as inputs; (ii) Whether boron nitrate suspension used in manufacture of metallised polyester film was eligible for Modvat credit as an input.

Issue (i): Whether ceramic evaporation boats could be treated as capital goods for the purpose of Modvat credit when they had been denied eligibility as inputs.

Analysis: The claim to credit on ceramic evaporation boats as capital goods was not found permissible where the Larger Bench had already held that the goods were not eligible inputs. The alternative basis under the capital goods provision could not be invoked when it had not been put before the Larger Bench deciding the reference, and the reasoning relied upon by the assessee did not assist such a claim.

Conclusion: The claim for Modvat credit on ceramic evaporation boats was rejected.

Issue (ii): Whether boron nitrate suspension used in manufacture of metallised polyester film was eligible for Modvat credit as an input.

Analysis: The Larger Bench had held that boron nitrate suspension was an eligible input for use in the manufacture of metallised polyester plastic film. That finding supported allowance of credit on that item.

Conclusion: The assessee was entitled to Modvat credit on boron nitrate suspension.

Final Conclusion: The appeals succeeded only to the limited extent of allowing Modvat credit on boron nitrate suspension, while credit on ceramic evaporation boats remained disallowed.

Ratio Decidendi: A good denied as an input cannot be shifted to capital goods credit on an unraised alternative basis, but credit remains available where the item is conclusively held to be an eligible input.

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