Modvat credit on inputs used for marketable condition and machine operation was held admissible for steel wire manufacture

Rule 57A of the Central Excise Rules allows Modvat credit on inputs used in or in relation to manufacture, including processes needed to make goods marketable. Rustop, applied to prevent rusting of steel wires before sale, was treated as part of the process for bringing the final product into marketable condition, so credit was admissible. Servo System-68, used to ensure smooth running of wire drawing machines, was likewise regarded as an input used in or in relation to manufacture, so credit was also admissible. The issue was decided in favour of the assessee.

---

---

Issues: Whether Modvat credit under Rule 57A of the Central Excise Rules was admissible in respect of rustop and Servo System-68 used by the assessee in the manufacture of steel wires.

Analysis: Rule 57A permits credit of duty paid on inputs used in or in relation to the manufacture of final products. Rustop was applied to prevent rusting of the manufactured steel wires before they were marketed, and therefore formed part of the process required to put the goods into a marketable condition. Servo System-68 was used to ensure smooth running in the wire drawing machines and was accordingly used in or in relation to the manufacture of the final product.

Conclusion: Modvat credit was admissible for both rustop and Servo System-68, and the issue was decided in favour of the assessee.

---