Modvat credit on DMT remained admissible where duty-paid methanol was cleared before further use in manufacture.

Modvat credit on DMT was held admissible because the DMT was used to manufacture methanol, and methanol was an approved product cleared from the factory on payment of central excise duty before its further use in making man-made yarn. The fact that methanol was later used within the same factory for another product did not, by itself, defeat credit entitlement where the relevant input credit related to the manufacture and duty-paid clearance of methanol. The view that Rule 57D could not assist because man-made yarn was the final product did not alter the position, and the Revenue's challenge failed.

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Issues: Whether Modvat credit was admissible on DMT used in the manufacture of methanol, where methanol was an approved product and was cleared on payment of duty before being used in the manufacture of man-made yarn.

Analysis: DMT was used to manufacture methanol, and methanol was not merely consumed captively without duty. It was cleared from the factory on payment of appropriate central excise duty before its further use in the manufacture of man-made yarn. Since methanol was a specific product covered by the notification issued under Rule 57A of the Central Excise Rules, the fact that it was also used within the same factory for manufacture of another product did not by itself defeat the credit entitlement. The argument that Rule 57D could not assist because man-made yarn was the final product did not alter the position, as the relevant input credit was claimed in relation to the manufacture and clearance of methanol.

Conclusion: Modvat credit on DMT was admissible, and the Revenue's challenge failed.

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