MODVAT credit on duty-paid components returned to the factory remained admissible despite earlier outward clearance.

Duty-paid components covered by the MODVAT scheme remained eligible for credit when they were cleared outside the factory and later received back, because their notified-goods character was not lost by the temporary removal. The refusal of delivery by the consignee and the fact that ownership continued with the manufacturer supported entitlement to credit. The provisions governing brought-back goods and inputs did not exclude such goods on these facts, so MODVAT credit was admissible.

---

---

Issues: Whether MODVAT credit was admissible on duty-paid components cleared outside the factory and subsequently received back.

Analysis: The components and the final products were covered by the MODVAT scheme and duty had already been paid on the components. Their earlier clearance out of the factory did not change their character as notified goods eligible for credit merely because they were later returned. The fact that the consignee refused delivery and the ownership continued to remain with the manufacturer also supported the claim. The provisions relating to brought-back goods and inputs did not exclude such goods from MODVAT credit in the circumstances of the case.

Conclusion: MODVAT credit was admissible and the appeal succeeded.

---