Modvat credit and cash refund barred when final products were non-dutiable and input-duty credit was unavailable.

Where the final product manufactured and cleared was non-dutiable, input-duty credit was not available because credit on inputs is barred when the finished product is exempt or subject to nil rate of duty. A debit in the Modvat account for such inputs was therefore not a permissible basis for claiming cash refund. On that reasoning, the cash refund was held inadmissible and the refund order was set aside.

---

---

Issues: Whether cash refund could be granted where the assessee's final product was non-dutiable and no input-duty credit was permissible.

Analysis: The final product manufactured and cleared during the relevant period was non-dutiable. In such a situation, input-duty credit was not available, and where the final product was exempt or chargeable to nil rate of duty, credit on inputs was barred. Payment made through debit in the Modvat account was therefore not permissible, and a cash refund of such amount could not be claimed.

Conclusion: The cash refund was not admissible and the order granting refund was set aside.

---