Modvat credit on duty-paid exempt goods upheld where manufacturer chose to pay duty and approved classification lists showed that intention.

Duty paid on captively consumed acetaldehyde, even though covered by an exemption notification, could still be treated as valid duty for Modvat credit where the manufacturer had consciously opted to pay duty and the approved classification lists recorded that intention. The Tribunal applied the settled principle that exemption does not prevent payment of duty if the assessee chooses that route. Because the duty was actually paid on acetaldehyde used in the manufacture of pentaerythritol, it could not be disregarded as non-duty merely due to the availability of exemption. Modvat credit was therefore available on the duty so paid.

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Issues: Whether duty paid on captively consumed acetaldehyde, though covered by an exemption notification, could be treated as valid duty for availment of Modvat credit.

Analysis: The Tribunal applied the settled principle that a manufacturer may choose to pay duty on goods even when they are exempted by notification. The appellant's classification lists for the relevant period expressly indicated an intention to pay duty on acetaldehyde for captive use in the manufacture of pentaerythritol, and those lists had been approved. On that basis, the duty paid could not be treated as non-duty merely because the goods were eligible for exemption.

Conclusion: The appellant was entitled to Modvat credit on the duty paid on acetaldehyde.

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