Modvat credit on duty-paid exempted inputs remains admissible despite exemption status

Modvat credit was admissible on inputs when excise duty had in fact been paid, even if the goods were otherwise exempted and duty was not payable. The relevant rule permits credit on duty-paid inputs, so credit cannot be denied merely because the inputs carried an exemption status. The Tribunal applied its earlier view on the same point and rejected the Revenue's challenge.

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Issues: Eligibility of Modvat credit on inputs received as exempted goods on which duty had in fact been paid.

Analysis: The relevant rule envisages grant of Modvat credit on duty paid inputs. Where excise duty has actually been paid on the inputs, the credit cannot be denied merely because the goods were otherwise exempted and the duty may not have been payable. The issue was already covered by the Tribunal's earlier view relied upon in the order.

Conclusion: Modvat credit was admissible. The appeal of the Revenue failed.

Ratio Decidendi: Credit under Rule 57A cannot be denied when duty has in fact been paid on inputs, even if those inputs were exempted goods and the duty was not otherwise payable.

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