Modvat credit on exempt purchased yarn denied where no intermediate product arose in the assessee's own manufacture.

Modvat credit under Rule 57A was unavailable on dyed nylon crimped yarn purchased without payment of duty because Rule 57D(2) applies only where an intermediate product emerges in the assessee's own manufacturing process. The dyed nylon yarn had not come into existence as an intermediate product in the assessee's hands; it was acquired as such from outside. Authorities cited on different factual settings, including job-work situations, were distinguished. Any alleged procedural lapse under Rule 57F did not change the operative fact that the goods were purchased in exempt form, so the credit claim failed.

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Issues: Whether Modvat credit was admissible on dyed nylon yarn that was exempt from duty, and whether Rule 57D(2) could be invoked where the intermediate product did not come into existence in the assessee's own manufacturing process.

Analysis: Modvat credit under Rule 57A was claimed in respect of dyed nylon crimped yarn purchased by the assessee without payment of duty. Rule 57D(2) applies only when an intermediate product emerges during the manufacture undertaken by the assessee. On the facts, the dyed nylon yarn had not come into existence in the assessee's hands as an intermediate product, and the goods were purchased as such. The precedents relied upon were distinguished because they proceeded on different factual settings, including cases where the goods were sent to a job worker on account of the assessee. The claimed procedural lapse under Rule 57F did not alter this factual position.

Conclusion: Modvat credit was not available, and the assessee's plea was rejected.

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