Modvat credit on export-linked clearances remains admissible where inputs were used in goods ultimately exported.

Modvat credit on inputs used in goods cleared under an export-linked procedure was admissible because the goods were actually used to manufacture final products that were eventually exported. Such clearances were not treated as exempt merely because they moved under Rule 191B/191BB for export, and there was no finding of diversion to any other use. The Tribunal applied its earlier decisions and the principle that export-bound goods do not become exempt goods by reason of the clearance procedure alone. In the absence of any rule authorising denial of credit in this situation, the Revenue's objection failed, and the existence of advance licences under a separate scheme did not alter that result.

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Issues: Whether Modvat credit on inputs used in goods cleared under Rule 191B/191BB for eventual export could be denied, and whether such clearances were to be treated as exempt clearances for the purpose of denying credit.

Analysis: The goods cleared under the export-linked procedure were admittedly used in the manufacture of final products that were eventually exported. There was no finding that the goods were diverted for any other use. The Tribunal followed its earlier decisions and the principle that goods eventually exported do not become exempt goods merely because they move under an export-oriented procedure. It further held that the absence of a provision enabling denial of credit in such a situation prevented the Revenue from treating the inputs as ineligible. The existence of advance licences under a separate scheme did not justify denial of Modvat credit where the statutory rules themselves permitted it.

Conclusion: Modvat credit on the inputs was held admissible and the Revenue's objection to such credit was rejected.

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