Modvat credit on inputs used in intermediate products was allowed where final ceramic insulators were cleared on duty payment.

Modvat credit on pig iron used to make disc/cap was admissible where the disc/cap was only an intermediate product captively consumed in the manufacture of ceramic insulators cleared on payment of duty. Rule 57C did not bar credit because the intermediate product was used in producing dutiable final products, and Rule 57D(2) applied to preserve the credit entitlement. The article states that the assessee was entitled to Modvat credit on the duty paid on pig iron.

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Issues: Whether Modvat credit on pig iron used to manufacture disc/cap, which was captively consumed in the manufacture of ceramic insulators cleared on payment of duty, was admissible under Rule 57D(2) of the Central Excise Rules, 1944.

Analysis: The disc/cap was an intermediate product and not the final product for the assessee. The ceramic insulators were the final products and were admittedly cleared on payment of duty. Since the intermediate product was captively consumed in the manufacture of dutiable final products, the bar under Rule 57C did not apply and Rule 57D(2) was attracted.

Conclusion: The assessee was entitled to Modvat credit on the duty paid on pig iron.

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