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Issues: Whether modvat or set-off credit under Notification No. 201/79-C.E. was available in respect of motor vehicle parts cleared without payment of duty under Chapter X procedure for supply to original equipment manufacturers.
Analysis: Notification No. 201/79-C.E. grants set-off only for duty-paid inputs used in the manufacture of goods which remain dutiable. The exclusion in the notification was treated as applicable to goods cleared without payment of duty under the exemption procedure, and the authorities rejected the contention that credit could still be utilised merely because similar goods were also cleared on duty payment. The Tribunal distinguished authorities dealing with one-to-one correlation and held that the direct precedent on Notification No. 201/79-C.E. covered the case, with the proviso requiring exempted clearances to be left out of the set-off computation.
Conclusion: The credit or set-off was not admissible for the goods cleared without duty under Chapter X, and the denial of benefit was upheld against the assessee.
Ratio Decidendi: Under Notification No. 201/79-C.E., set-off credit cannot be extended to goods cleared without payment of duty under the exemption procedure where the notification excludes exempted goods from its operation.
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