Branded patent medicaments for export remained dutiable goods, so MODVAT credit on inputs could not be denied.

Medicaments cleared for export under a registered trademark were treated as branded patent or proprietary medicaments because the relevant period was after the trademark registration took effect. They therefore fell under the dutiable tariff entry, and removal without payment of duty for export did not by itself make them exempted goods. As the inputs were used in the manufacture of dutiable final products, MODVAT credit on those inputs could not be denied under Rule 57C of the Central Excise Rules, 1944. The denial of credit was therefore unsustainable.

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Issues: Whether medicaments cleared for export under a registered trademark were classifiable as branded patent or proprietary medicaments so as to attract duty and preserve eligibility to MODVAT credit on inputs, or whether they were to be treated as exempted goods for denial of credit under Rule 57C of the Central Excise Rules, 1944.

Analysis: The period in dispute fell after the trademark had become registered with effect from 2-4-1996. On that footing, the medicaments cleared for export under the registered brand name answered the description of branded patent or proprietary medicaments and were classifiable under the tariff entry carrying duty. The fact that the goods were removed without payment of duty for export did not by itself make them exempted goods. Since the inputs were used in the manufacture of dutiable final products, MODVAT credit could not be denied.

Conclusion: The denial of MODVAT credit was unsustainable and the issue was decided in favour of the assessee.

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