Whether Modvat credit taken on duty paid inputs can be used for payment of duty on similar goods manufactured out of non duty paid inputs - Instructions regarding - Central Excise - 37/88

Whether Modvat credit taken on duty paid inputs can be used for payment of duty on similar goods manufactured out of non duty paid inputs - Instructions regarding Circular No. 37/88 Dated 8-8-1988 [From F. No. 261/72/16/87-CX.8] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise and Customs, New Delhi Subject: Whether Modvat credit taken on duty paid inputs can be used for payment of duty on similar goods manufactured out of non duty paid inputs - Instructions regarding. I am directed to say that doubts have arisen whether the credit of duty taken on inputs brought under Modvat scheme could be utilised towards payment of duty even in respect of the same final products in the manufacture of which inputs brought without payment of duty under Chapter X of the Central Excise Rules have been utilised. To illustrate, in the manufacture of iron and steel products, ferro alloys are brought both under Chapter X without payment and on payment of duty. The duty on ferro alloys is much more than on the final products. Therefore there is always excess accumulation of credit as against the actual payment of duty on the final products manufactured therefrom. The credit thus earned on these inputs is being utilised by certain assessees for payment of duty on the finished product manufactured out of the non-duty paid inputs brought under Chapter X procedure. The matter has been examined by the Board. It is observed that what Rule 57F (3) basically provides is that the credit of duty allowed in respect of any inputs may be utilised towards payment of duty on any of the final products in or in relation to the manufacture of which such inputs are intended to be used. This rule does not debar utilisation of excess credit (accumulated because of less duty on final product than on the inputs) for payment of duty on the same final products which are manufactured by non-duty paid inputs (whether procured under Chapter X procedure or otherwise exempt under any notification). Moreover there is no one to one co-relation of input and final product under the Modvat Scheme for utilisation of credit. It has therefore been decided by the Board that the excess credit accumulated if any, can be utilised towards payment of duty on the same final products even if manufactured out of non-duty paid inputs. The above instructions may be brought to the notice of the field formations. Demands, if any raised in this regard may be settled accordingly. Receipt of this letter may please be acknowledged.