Prospective departmental circular change cannot unsettle Modvat credit validly taken under an earlier permissive view.

Modvat credit on duty-paid PVC bottles and jars used for exempt goods was treated as admissible when duty was paid in line with an existing departmental circular permitting such payment and consequential credit. A later circular reversing that view could not defeat credit already taken before the revised trade notice reached the assessee, and the subsequent clarification indicated that past cases should not be reopened. The revised position was therefore prospective, leaving earlier credit undisturbed.

---

---

Issues: Whether Modvat credit was admissible on duty paid on PVC bottles and jars when the goods were exempt under Notification No. 53/88, and whether the later departmental circular withdrawing the earlier permissive view could defeat credit already taken in accordance with the earlier circular.

Analysis: The duty on the containers was paid during the period when the manufacturer acted in accordance with the Board's earlier circular permitting payment of duty on exempted goods and consequential credit. The later circular issued on 04-01-1991 reversing that position could not be treated as having reached the assessee before February 1991, and the trade notice communicating the change was dated 11-02-1991. The later Board clarification in December 1991 also stated that past cases should not be reopened, indicating prospective application of the revised view. Credit taken in reliance on the earlier departmental understanding could not be frustrated by a subsequent change in instructions.

Conclusion: Modvat credit was correctly allowed, and the departmental challenge failed.

Final Conclusion: The appeal was dismissed because the assessee's credit, taken in accordance with the then-prevailing departmental circular, could not be upset by a subsequent contrary circular operating prospectively.

Ratio Decidendi: Where an assessee acts on an existing departmental circular permitting duty payment and consequential credit on exempted goods, a later circular reversing that position operates prospectively and cannot unsettle credit validly taken earlier.

---