Circular No. 301/17/97-CX dated 10/3/97

Subject: Admissibility of Modvat credit on inputs used in manufacture of moulds

Representations have been received in the Board regarding the denial of Modvat credit on inputs like chemicals and resins etc., used in the manufacture of sand moulds for subsequent production of iron castings.

2. It has been reported that Board"s Circular No. 29/88 dated 30.6.1988 clarified that credit in such case will not be admissible in as much as said moulds are in the nature of equipment and that was excluded under proviso to rule 57-A for grant of modvat. Such moulds were further exempted from duty and therefore Board held that credit on the inputs cannot be permitted in such cases.

3. Subsequent to above Board has received references from Chief Commissioners and Commissioners of Central Excise inviting Board"s attention to the judgement of larger bench of CEGAT in the case of Shri Ramakrishna Steel Industries Limited vs. CCE, Madras 1996 (82) ELT 575 (T) where the Tribunal held that sand moulds in such cases are not marketable/excisable commodity and the inputs used for their production will be essentially for the manufacture of castings which is a dutiable final product. Tribunal finally held that chemicals and resin which are used in manufacture of such moulds are used in relation to the manufacture of the final product.

4. While as consequent to the aforesaid judgement credit is being allowed by some of Commissionerates, others are however denying such credit.

5. Board has examined the issue in light of aforesaid quoted judgement. All pending disputes regarding eligibility of credit on the inputs used in the manufacture of moulds may be decided in the light of the said CEGAT decision. Board"s circular No. 29/88 is hereby withdrawn.

Sd/-
(Mallika Arya)
Under Secretary to the Govt. of India

F.No. 267/7/97-CX.8

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