Modvat credit on inputs used for moulds in bottle manufacture cannot be denied where Rule 57D(2) protects intermediate products.

Rule 57D(2) of the Central Excise Rules protected Modvat credit on inputs used in the manufacture of moulds employed in producing glass bottles. Credit could not be denied merely because intermediate products emerged in the manufacturing process or because the inputs were used to make capital goods under Rule 57Q. Treating the moulds as tools did not alter the statutory position where the rule's conditions for non-denial were satisfied, so the denial of credit was unsustainable in law.

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Issues: Whether Modvat credit could be denied on inputs used in the manufacture of moulds which were intermediate products or capital goods used in the manufacture of glass bottles.

Analysis: Rule 57D(2) of the Central Excise Rules provided that credit of specified duty on inputs shall not be denied merely because intermediate products emerge during the manufacture of final products, or because such inputs are used in the manufacture of capital goods under Rule 57Q. The moulds were used in the course of manufacture of glass bottles and fell within the protective ambit of the rule. The fact that the moulds were treated as tools did not justify denial of credit where the statutory conditions for non-denial were satisfied.

Conclusion: Modvat credit could not be denied, and the denial was in law and unsustainable.

Ratio Decidendi: Modvat credit on inputs cannot be denied where the inputs are used in producing intermediate products or capital goods employed in the manufacture of the final product, by virtue of Rule 57D(2) of the Central Excise Rules.

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