Modvat credit on export inputs not barred by SSI notification; unutilised credit refund remained admissible.

Notification No. 16/97 barred Modvat credit only for inputs used in the manufacture of specified goods cleared for home consumption and limited use of credit on capital goods for such clearances; it did not extend that bar to inputs used in exported goods. On that construction, availing SSI exemption under the notification did not by itself make the assessee ineligible for Modvat credit. As the unutilised credit could not be adjusted against home clearances, refund under Rule 57F(13) was admissible and the denial of refund was ?

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Issues: Whether Notification No. 16/97 barred Modvat credit on inputs used in the manufacture of exported goods and, on that basis, justified denial of refund of unutilised credit under Rule 57F(13) of the Central Excise Rules, 1944.

Analysis: The condition in paragraph 2(iii) of Notification No. 16/97 prohibited availing Modvat credit only in respect of inputs used in the manufacture of specified goods cleared for home consumption and also restricted utilisation of credit on capital goods for such clearances. It did not extend to inputs used in the manufacture of goods exported out of India. Since the notification contained no further restriction, the view that the assessee became ineligible for Modvat credit merely because it availed SSI exemption under the notification was incorrect. The refund of credit, being otherwise admissible under Rule 57F(13) where the credit could not be utilised against home clearances, was therefore wrongly denied.

Conclusion: The notification did not prohibit Modvat credit on inputs used for exported products, and the assessee was entitled to refund of the unutilised credit.

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