Modvat inputs cleared as such may be excluded from aggregate clearances for small-scale exemption eligibility.

Duty-paid inputs cleared as such under Rule 57F(1)(ii) were treated by the Board as not constituting goods manufactured by the assessee when they were purchased for Modvat credit, cleared on payment of duty, and not used in manufacture of the final product. On that reasoning, such clearances were said not to form part of the aggregate value of clearances for eligibility under Notification No. 175/86-C.E. The adjudicating authority had not considered this clarification, so the impugned order was set aside and the matter remanded for fresh consideration in accordance with law.

---

---

Issues: Whether duty-paid inputs cleared as such under Rule 57F(1)(ii) of the Central Excise Rules, 1944 were required to be included in the aggregate value of clearances for determining eligibility to the benefit of Notification No. 175/86-C.E.

Analysis: The Board had clarified that inputs purchased for availing Modvat credit, when cleared as such on payment of duty and not used in the manufacture of the final product, could not be treated as goods manufactured by the assessee. On that basis, such clearances were stated not to form part of the aggregate value of clearances under the small scale exemption notification. As the adjudicating authority had not considered this clarification when passing the impugned order, the matter required reconsideration in light of the Board's view and in accordance with law.

Conclusion: The impugned order was set aside and the matter was remanded for fresh consideration of the issue.

---