Mathur, J.
1. In this group of Writ Petitions, the validity and application of the Scheme as modified by the Notification of the Central Government dated 10.12.1998 introducing Clause 5 under which the independent processor of proceeded textile fabrics have been denied benefit of utilisation of MODVAT credit, has been challenged.
2. The relevant rules read as under:
'In exercise of the powers conferred by Sub-section (3) of Section 3A of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby specifies that the rate of excise duty on processed textile fabrics falling under heading Nos. 52.07, 52.08, 52.09, 54.06, 54.07, 55.11, 55.12, 55.13 and 55.14 of the Schedule to the Central ExciseTariff Act, 1985 (5 of 1986), manufactured or produced by an independent processor with the aid of a hot-air stenter shall be.
(i) in the case of a processing factory whose average value of processed fabric is upto and including Rs. 30 per s.q.m. 12.8 per cent, of the capacity of production in value terms per chamber per month, equivalent to Rs. 1.5 lacs per chamber per month and
(ii) in the case of a processing factory whose average value of processed fabric is exceeding Rs. 30 per sq. m. 12.8 per cent, of the capacity of production in value terms per chamber per month; equivalent to Rs. 2 lacs per chamber per month.
.....
5. Notwithstanding anything contained above, the independent processor of processed textile fabrics shall not be eligible to avail any credit of duty paid on inputs or capital goods under the Central Excise Rules, 1944 or any notification issued thereunder.
6. Nothing contained in this notification shall apply to.
(a) any goods manufactured or produced prior to the 16th day of December, 1998 and cleared on or after that date;
(b) a composite mill, i.e., a manufacturer or processor, who is engaged in the processing of fabrics with the aid of power along with the spinning of yarn from fibres and weaving or knitting or crocheting of fabrics within the same factory and includes a multi-locational composite mill, i.e., a public limited company which is engaged in the processing of fabrics with the aid of power along with the spinning of yarn from fibres and weaving or knitting or crocheting of fabrics in one or more factories owned by the same public limited company.
(7) This notification shall come into effect from the IGth day of December, 1998.'
3. The petitioners are manufacturers and processors engaged in manufacturing textile fabrics falling under the heading 52.07, 52.08, 52,09, 54.06, 54.07, 55.11, 55.12, 55.13 and 55.14 of the Schedule to the Central Excise Tariff Act, 1985. The say of the petitioner-Companies is that they are manufacturers of the Man Made Fabrics with the aid of Hot Air Stentering machine. They are covered under the definition of 'Independent Processor'. Each of the petitioner Company submitted an application before the Assistant Commissioner, Central Excise Division, Jodhpur, stating that as they have already taken MODVAT credit under Rule 570 before introduction of impugned rule and the same is lying unutilised (in their RG 230 Part II Register), they maybe permitted to utilise the said credit for payment of Central Excise Duty. The prayer has been refused on the ground that MODVAT credit lying in the balance unutilised stood lapsed on account of the impugned Notification dated 16.12.1998. It is contended by the petitioner assessees that on goods manufactured prior to 16.12.1998 on which the duty has been paid and the credit facility has been availed. Clause 5 of the impugned Notification cannot be applied.
4. Per contra, it is submitted by the Revenue that the credit in balance as on 15.12.1998 can only be utilised by paying duty as specified in Section 3A of the Act and, as such, credit lying unutilised as on 16.12.1998 stood lapsed by virtue of Clause 5 of the Notification No. 36/98-C.E., dated 10.12.1998. It is also submitted that the impugned Notification provides for payment of excise duty at the rate of Rs. 1.5 lacs per chamber per month in case of average value of fabric processed by an independent processor using not-air stenter is not exceeding Rs. 30 per sq. m. and at the rate of Rs. 2 lacs per chamber per month in case of average value of fabric processed by an independentprocessor using hot-air stenter is exceeding Rs. 30 per sq.m. It is also submitted that as a result of MODVAT provision, the credit is accrued and not earned and, therefore, it is wrong to say that the effect of Clause 5 of the impugned Notification is retrospective and it does not affect the credit already utilised against the clearance made prior to the effect of Notification dt. 16.12.1998 and also it does not affect the utilisation of MODVAT credit for the clearance of goods manufactured prior to 16.12.98 and lying in stock as on 15.12.98 and cleared thereafter.
5. It is worthwhile to mention that during pendency of the writ petition, in the Finance Bill of 2001, Section 3A of the Central Excise Act, 1944 has been withdrawn and consequently, notification No. 38/98 dated 10.12.1998 also stands non-existent. Thus, the say of the petitioner is that Clause 5 of the impugned Notification has become redundant. In the changed circumstances, it is submitted that in view of withdrawal of Section 3A of the Act of 1944 under which the said impugned notification was issued, Clause 5 of the impugned notification whereby independent processor of the processed textile fabric was not permitted to avail any credit of duty paid on input retrospectively, stands withdrawn as on the date and, therefore, the petitioners are now entitled and eligible to avail the credit of duty paid on input or capital goods under the Central Excise Rules, 1944. It is also submitted by Mr. Bhandari that in the changed circumstances, the petitioners have become entitled to avail MODVAT credit earned by it as on 16.12.1998 and lying with the individual petitioner unutilised.
6. We have considered the rival contentions. Under the MODVAT scheme, the right to credit becomes absolute where the input is used in manufacturing of the final product. If on inputs, the assessee has already paid the tax on the basis that the goods are utilised in the manufacturing of further product as inputs thereto, then the tax and goods get adjusted, which are finished subsequently. Thus, a right is accrued to the assessee on the date he paid the tax on raw materials or inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. This is the setlled position of law, which has been reiterated by the Apex Court in Eicher Motors Ltd. v. Union of India (1). The Apex Court also observed that a credit under the MODVAT scheme was 'as good as tax paid'. Thus, once the capital goods which have already been utilised and the credit has been received against their utilisation, then Clause 5 cannot be given retrospective effect so as to nullify the MODVAT credit, which has already been earned by the individual writ petitioner. It is further significant to notice that Sub Clause (a) of Clause (a) of the impugned Notification clearly provides a non obstante clause to the effect that nothing contained in the Notification shall apply to any goods manufactured or produced prior to 16.12.1998 and cleared on or after that date.
7. Consequently, this group of Writ Petitions is allowed and the respondents are directed to allow the petitioners to avail the MODVAT credit earned by them as on 16.12.1998. There shall be no order as to costs.