Modvat credit remains available where goods are cleared under bond for export, as Rule 57C does not apply.

Clearance of final products under bond without payment of duty for export was treated as distinct from clearance at nil rate of duty or of wholly exempt goods, so the precondition for applying Rule 57C of the Central Excise Rules, 1944 was not satisfied. On that basis, Modvat credit on inputs remained admissible, and the contrary view that such credit was barred was rejected.

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Issues: Whether Modvat credit on inputs was admissible when the final products were cleared under bond without payment of duty under Notification No. 49/94-C.E. (N.T.), and whether Rule 57C of the Central Excise Rules, 1944 barred such credit on the footing that the clearances were at nil rate of duty or were wholly exempt.

Analysis: The notification issued under Rule 13 of the Central Excise Rules, 1944 permitted export of goods under bond without payment of duty. Clearance without payment of duty was treated as distinct from goods wholly exempt from duty or goods chargeable to nil rate of duty. On that basis, the condition precedent for application of Rule 57C was absent. The contrary view taken below was held to be erroneous, and the decisions relied upon by the assessee were followed.

Conclusion: Rule 57C was not attracted, and Modvat credit on the inputs was admissible to the assessee.

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