Modvat credit on inputs and exempt products was referred to the High Court without a final merits ruling.

Modvat credit on inputs was questioned on the ground that a portion of the inputs had been used in the manufacture of exempt final products. The matter turned on whether credit could be denied on that basis and whether the legal issue required reference to the High Court. The reference was made to the High Court, and the reference application was disposed of without any final adjudication on the merits.

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Issues: Whether Modvat credit on inputs could be denied merely because a fraction of the inputs was used in the manufacture of exempt final products, and whether the question should be referred to the High Court.

Outcome: The question was referred to the High Court and the reference application was disposed of without final adjudication on the merits.

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