Modvat credit denied for inputs used in exempt tools and dies, which were treated as final products and not intermediate goods.

Modvat credit under Rule 57A was not admissible on inputs used to manufacture tools and dies that were fully exempt from duty and used only within the factory. The tools and dies were treated as final products, not intermediate goods, because they did not form part of or get incorporated into the finished excisable goods; they were merely aids in the manufacturing process and were in the nature of capital goods. Credit was also unavailable because the inputs were not shown to be parts, components, spares or accessories of capital goods, and the goods manufactured from the inputs were exempt under Notification No. 67/95-C.E.

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Issues: Whether Modvat credit under Rule 57A was admissible on inputs used in the manufacture of tools and dies that were fully exempt from duty and used within the factory.

Analysis: The tools and dies were held to be final products and not intermediate goods, as they did not form part of or get incorporated into the finished excisable goods. They were used only as aids in the manufacturing process and were in the nature of capital goods. Since the claim was made as input credit under Rule 57A, and the goods manufactured from the inputs were exempt under Notification No. 67/95-C.E., the credit was not allowable. The inputs were also not shown to be parts, components, spares, or accessories of capital goods.

Conclusion: The denial of Modvat credit was correct and the issue was decided against the assessee.

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