Modvat credit on export-in-bond clearances remains available where goods are not treated as exempted final products.

Processed fabrics cleared under Notification No. 47/94 pursuant to the export-in-bond procedure under Rule 13 were treated as dutiable goods, not exempted final products, so inputs used in their manufacture remained eligible for deemed Modvat credit under Rule 57A. Because the clearance was under a special export procedure and not by way of duty exemption under Rule 8 or Section 5A, the bar in Rule 57C did not apply, and a departmental circular could not displace that legal position. The result was that Modvat credit could not be denied on that basis.

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Issues: Whether Modvat credit on inputs used in the manufacture of processed fabrics cleared under Notification No. 47/94 issued under Rule 13 of the Central Excise Rules was admissible, and whether the department could deny such credit by invoking Rule 57C of the Central Excise Rules.

Analysis: Notification No. 47/94 was issued to give effect to the export-in-bond procedure under Rule 13 and not as an exemption notification under Rule 8 or Section 5A of the Central Excise Act, 1944. The processed fabrics were otherwise dutiable goods and were eligible for deemed Modvat credit under Rule 57A. Since the clearance was made under the special export procedure and not by way of duty exemption, the bar under Rule 57C did not apply. The departmental circular could not override the legal position already settled by the Tribunal.

Conclusion: Rule 57C was not attracted and the assessee was entitled to Modvat credit.

Final Conclusion: The department's appeals failed, and the orders allowing credit and consequential relief stood sustained.

Ratio Decidendi: Goods cleared under the export-in-bond procedure in terms of Rule 13 and Notification No. 47/94 are not treated as exempted final products for the purpose of Rule 57C, so Modvat credit on inputs used in their manufacture cannot be denied on that basis.

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