Modvat credit on inputs for fully exempt final products is barred under Rule 57C, with denial sustained.

Modvat credit was held inadmissible on duty-paid inputs used in or in relation to the manufacture of components cleared without duty under Notification 217/85. The Tribunal applied the Larger Bench ruling that credit is not available where the final product is fully exempt from duty, and sustained the bar under Rule 57C. The earlier view supporting credit was treated as no longer good law, and the denial of credit for the exempt clearances remained in force.

---

---

Issues: Whether Modvat credit could be taken on inputs used in or in relation to the manufacture of components cleared without payment of duty under Notification 217/85.

Analysis: The Tribunal noted that the earlier view supporting credit was no longer good law. It followed the Larger Bench ruling that a manufacturer is not entitled to Modvat credit on duty paid inputs used in or in relation to the manufacture of a final product that is fully exempted from duty, and upheld the application of Rule 57C.

Conclusion: Modvat credit was not admissible on the inputs used for the exempt clearances, and the denial of credit was sustained.

Ratio Decidendi: Modvat credit is not available on inputs used in or in relation to the manufacture of a final product that is fully exempt from duty, and Rule 57C bars such credit.

---