Modvat credit on inputs destroyed in fire remains admissible where manufacture had already commenced and processing was underway.

Modvat credit on inputs cannot be denied merely because the inputs are destroyed by fire after they have entered the manufacturing stream and manufacture is already in progress. The recorded factual finding was that the fibre had been issued for processing, mixing had been completed, and the next stage of manufacture was underway when the fire occurred; that finding was not displaced in appeal. Applying this principle, the Tribunal held that credit remained admissible because the inputs had been used in manufacture before destruction, and the revenue's objection failed.

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Issues: Whether Modvat credit could be denied on inputs destroyed in a fire accident when the inputs had already entered the manufacturing stream and the process of manufacture was in progress.

Analysis: The factual finding recorded by the adjudicating authority, based on the Range Superintendent's report, was that the fibre had been issued to the manufacturing stream, the process of mixing had been completed, and the next process was in progress when the fire occurred. That finding was not displaced in appeal. The Tribunal applied the principle that Modvat credit on inputs used in manufacture cannot be denied merely because the inputs are destroyed during the process of manufacture before emergence of finished goods.

Conclusion: Modvat credit was admissible and the revenue's objection failed.

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