Modvat credit on inputs exported under bond cannot be denied merely because no manufacture took place.

Modvat credit on duty-paid inputs could not be denied merely because the inputs were exported under bond as such. Rule 57F of the Central Excise Rules, 1944 permitted removal of inputs for export under bond, and Rule 57F(12) governed credit utilisation in such cases. The prior view that credit was unavailable because the intermediate processing did not amount to manufacture was not decisive. A Board circular also clarified that clearance of inputs as such for export under bond is to be treated at par with a final product for credit purposes, so the assessee was entitled to the credit.

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Issues: Whether Modvat credit on duty-paid inputs was admissible when the inputs were exported under bond as such.

Analysis: The credit was disallowed below on the premise that the processing undertaken did not amount to manufacture. The decisive consideration, however, was that the inputs were exported under bond. Rule 57F of the Central Excise Rules, 1944 permitted removal of inputs for export under bond, and Rule 57F(12) governed utilization of the credit in such cases. The Board's circular also clarified that clearance of inputs as such for export under bond is to be treated at par with a final product for the purpose of credit utilization.

Conclusion: Modvat credit could not be denied merely because the inputs were exported under bond as such, and the assessee was entitled to the credit.

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