Modvat credit upheld for exempted finished goods, denial deemed discriminatory.

The Tribunal upheld the decision allowing Modvat credit to the respondent for inputs used in manufacturing finished goods cleared on duty payment, despite the final products being exempted later. The Tribunal emphasized that denying the credit would be discriminatory and contrary to Rule 57 A of the Central Excise Rules. It concluded that the denial of Modvat credit was not justifiable, and the appellants were entitled to the credit as per the law. The appeal was rejected, affirming the order allowing the Modvat credit to the respondent.

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Issues:
1. Denial of CENVAT Credit on inputs used for manufacturing finished goods cleared on duty payment as directed by the High Court.
2. Dispute over the dutiability of the final products and the subsequent denial of Modvat credit by the Revenue.
3. Interpretation of Rule 57 A of the Central Excise Rules regarding the allowance of Modvat credit on inputs used in final products.

Analysis:
1. The appeal was filed against an order denying CENVAT Credit on inputs used for manufacturing finished goods cleared on duty payment as directed by the High Court. The first appellate authority had allowed the Modvat credit to the respondent, which was contested by the Revenue. The Revenue argued that since the final product was exempted, the respondent could not avail CENVAT credit. However, the first appellate authority upheld the respondent's right to the Modvat credit based on the duty paid on inputs. The Tribunal found that the first appellate authority correctly followed the law and upheld the order allowing the Modvat credit to the respondent.

2. The issue revolved around the dutiability of the final products and the subsequent denial of Modvat credit by the Revenue. The Tribunal noted that the goods were held dutiable in previous orders, and the Commissioner (Appeals) had allowed the Modvat credit for duty paid on inputs used in manufacturing the products. The Tribunal emphasized that even if the final products were classified as exempted later, the appellants were still required to pay duty on them. Denying the Modvat credit in such a scenario would be discriminatory and contrary to Rule 57 A of the Central Excise Rules. Therefore, the Tribunal held that the denial of Modvat credit was not justifiable, and the appellants were eligible for the credit.

3. The Tribunal delved into the provisions of Rule 57 A of the Central Excise Rules, which allowed for Modvat credit on inputs used in final products charged to duty. Despite the final products being held as exempted later, the duty had already been paid on them. The Tribunal emphasized that the denial of Modvat credit in such circumstances would go against the provisions of Rule 57 A and would be unjustifiable. Therefore, the Tribunal concluded that the order denying the Modvat credit was not sustainable, and the appellants were entitled to the credit as per the law. The appeal was rejected, upholding the order allowing the Modvat credit to the respondent.

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