Modvat credit for job-worked intermediate goods was upheld where duty-paid inputs and prescribed documentation were established.

Modvat credit was available on duty-paid laminations and stampings cleared to job workers under the prescribed Rule 57F(2) procedure for manufacture of an intermediate product and received back with cross-referenced gate passes and challans. The documentation showed the required particulars for the inputs and final product, and the duty-paid character of the inputs was established. Rule 57J, read with the relevant notification, permitted credit on inputs used in making intermediate products for adjustment against duty on the final products. Credit could not be denied merely because the materials moved through challans and gate passes for intermediate processing, so the disallowance was unsustainable.

---

---

Issues: Whether Modvat credit was admissible on duty paid laminations and stampings cleared to job workers under Rule 57F(2) for manufacture of an intermediate product and received back with gate passes and challans.

Analysis: The appellants manufactured laminations and stampings from bought out inputs, paid duty on their clearance to job workers, and later took credit on the return of die cast rotors manufactured from those inputs. The relevant documents showed cross-references between the gate passes and Rule 57F(2) challans, and the declarations contained the particulars required for the inputs and final product. The duty-paid nature of the inputs was established, and there was no finding that the substantive requirements for credit were not satisfied. Rule 57J, read with the notification issued thereunder, enabled credit of duty paid on inputs used in the manufacture of intermediate products for use against duty on the final products.

Conclusion: The credit was admissible and the denial by the lower authorities was unsustainable.

Final Conclusion: The order disallowing Modvat credit was set aside and the assessee succeeded on the central issue of credit entitlement.

Ratio Decidendi: Where duty paid inputs are cleared to job workers under the prescribed procedure and the duty-paid nature and use in manufacture are established, Modvat credit cannot be denied merely because the goods moved through challans and gate passes for intermediate processing.

---