Modvat credit on job-work inputs was upheld where duty-paid final products were cleared and duty was discharged.

Modvat credit was considered admissible on duty-paid seamless pipes and tubes sent to job workers for conversion into motor vehicle parts, because the processed goods were returned and duty was paid on the final products cleared from the factory. The note applies the principle that duty-paid inputs used through a job-work chain in the manufacture of dutiable final products remain credit-eligible when the final output suffers duty. On those facts, the confirmed duty and penalty were stayed by waiving pre-deposit pending disposal of the appeal.

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Issues: Whether Modvat credit was admissible on duty-paid inputs sent to job workers for conversion into motor vehicle parts, and whether pre-deposit of the confirmed duty and penalty should be waived pending appeal.

Analysis: The applicants received duty-paid seamless pipes/tubes, took credit of the duty paid on the inputs, and sent them to job workers for conversion into motor vehicle parts. The processed goods were returned and duty was paid on the final products cleared from the factory. In identical circumstances, credit had already been held admissible, and on these facts there was no reason to deny credit on the inputs used in relation to manufacture of the final products.

Conclusion: Modvat credit was held to be admissible, and the confirmed duty and penalty were ordered to be stayed by waiving pre-deposit pending disposal of the appeal.

Ratio Decidendi: Where duty-paid inputs are used through a job-work chain in the manufacture of dutiable final products on which duty is paid, Modvat credit on such inputs is admissible and pre-deposit of the resulting demand may be waived.

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