Modvat credit on exports under bond remained admissible because duty-free clearance did not trigger the Rule 57C bar.

Modvat credit on inputs was held admissible where final products were cleared without payment of duty for export under bond. Clearance for export under bond was not treated as the kind of exemption that attracts the bar in Rule 57C, so the credit could not be denied merely because duty was not paid at the time of clearance. On that basis, the demand raised under Rule 57-I read with Section 11A could not survive, and the impugned order was set aside.

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Issues: Whether Modvat credit on inputs was deniable under Rule 57C when the final products were cleared without payment of duty for export under bond under Rule 191B.

Analysis: The decisive question was whether clearance of the final products without duty for export under bond amounted to an exemption so as to attract the bar under Rule 57C. The Tribunal followed its earlier view and the cited precedent that goods cleared for export under bond do not fall within the mischief of Rule 57C merely because duty is not paid at the stage of clearance. In such a situation, the credit taken on inputs is not rendered inadmissible, and the demand raised by invoking Rule 57-I read with Section 11A cannot survive.

Conclusion: The bar of Rule 57C was not attracted, and the Modvat credit was admissible to the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief according to law.

Ratio Decidendi: Clearance of final products without payment of duty for export under bond does not, by itself, constitute the type of exemption that triggers the prohibition on input credit under Rule 57C.

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