Modvat credit on export-related fabric clearances remained admissible; Rule 57C did not apply to Rule 13 removals.

Processed fabrics cleared under Rule 13 for manufacture of export garments were treated as removals made under the export-clearance procedure in Chapter X and the governing notification, not as a substantive exemption from duty. On that basis, the notification was not regarded as creating a duty exemption, so the condition for applying Rule 57C was not satisfied. The stated position is that Modvat credit on duty-paid inputs remained admissible and Rule 57C did not apply, following the earlier tribunal view on the same issue.

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Issues: Whether Modvat credit of duty paid on inputs was admissible when the processed fabrics were removed without payment of duty under Rule 13 for manufacture of export garments, and whether such clearances attracted Rule 57C.

Analysis: The clearance of processed fabrics under Rule 13, read with the procedure prescribed in Chapter X and the notification governing such removals, was treated as giving effect to the statutory scheme for export-related removals rather than as a substantive exemption from duty. Since the notification did not create a duty exemption, the basis for invoking Rule 57C was absent. The earlier tribunal decision on the same point was followed.

Conclusion: Modvat credit was admissible and Rule 57C did not apply. The appeals failed.

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