Modvat credit on duty-paid intermediate goods is admissible when a job worker pays excise duty before returning processed products.

Rule 57F(4) permits inputs to be sent to a job worker for processing into intermediate products, and it does not prevent the job worker from using additional materials or paying central excise duty on the intermediate product. Where duty is actually paid on the intermediate goods before return, the manufacturer of the final product may take Modvat credit of that duty, and no Revenue prejudice is shown on those facts.

---

---

Issues: Whether Modvat credit was admissible to the manufacturer on duty paid by the job worker on intermediate products received back after processing under Rule 57F(4) of the Central Excise Rules, 1944.

Analysis: Inputs were sent to the job worker under Rule 57F(4) for processing into intermediate products, and the job worker manufactured and returned those products on payment of central excise duty. The rule permits removal of inputs to a job worker for operations necessary for manufacture of the final product or intermediate products, and does not prohibit the job worker from adding his own materials or paying duty on the intermediate product. Since the duty had in fact been paid at the intermediate stage, the manufacturer of the final product was entitled to take credit of that duty, and no prejudice to the Revenue was shown.

Conclusion: Modvat credit of the duty paid by the job worker on the intermediate products was admissible to the assessee.

---