Modvat credit to be utilised for inputs actually used - In the case of aerated water - Clarification regarding - Central Excise - 24/88

Modvat credit to be utilised for inputs actually used - In the case of aerated water - Clarification regarding Circular No. 24/88 Dated 10-6-1988 [From F. No. 267/64/88/CX.8] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Modvat credit to be utilised for inputs actually used - In the case of aerated water - Clarification regarding. I am directed to say that doubts have been raised as to whether with the withdrawal of Modvat credit in respect of aerated water vide Notification No. 203/87-C.E. w.e.f. 1-10-1987, duty is required to be recovered on inputs brought for use in the manufacture of aerated water but lying unutilised as on 1-10-1987. The matter has been examined by the Board. It is observed that under Rule 57F(1) Modvat credit on inputs can either be utilised for payment of duty on the final product for which such inputs have been brought into the factory or, for payment of duty on inputs cleared as such for home consumption or for export, as if such inputs have been manufactured in the said factory. Therefore, where the credit taken on inputs has already been utilised by a manufacturer for payment of duty on aerated waters prior to 1-10-1987 without utilising the said inputs duty will have to be collected on such inputs since the final product (i.e. aerated water) would no longer be covered under the Modvat Scheme. Likewise, where the manufacturer opts to clear the inputs for home consumption or export, instead of using in the manufacture of the final product, then also duty will have to be paid on these inputs as if these inputs were manufactured in his factory itself. It has been decided that the duty on unutilised inputs lying in stock as on 1-10-1987 should be recovered either through the credit balance if any, lying in RG 23A account or through PLA. The above instructions may be brought to the notice of the field formations. Trade interests may also be informed suitably. Receipt of this letter may please be acknowledged.