HC : Allows MODVAT credit on inputs found defective / lost during manufacture of watches

HC upholds order of CESTAT allowing MODVAT credit under Rule 57A of Central Excise Rules, 1944 on inputs found defective, unfit for use on production floor in factory premises; Accepts assessee’s contention that R&D tests during which inputs were destroyed / become waste are integral to manufacturing of watches and therefore, MODVAT credit cannot be denied in terms of Rule 57A r/w Rule 57D; Notes CESTAT’s categorical finding that assessee had reversed credit availed at the time of receipt, upon discovering inputs / parts of watches unfit for use and during course of manufacture, certain inputs were found defective / lost; Further remarks that MODVAT credit cannot be denied by applying provisions of Rule 57D when duty has indeed been paid; Perusal of Rule 57A(4) indicates that MODVAT credit is available on inputs used in final products manufacture or in or in relation thereto whether directly or indirectly, hence, it is not required that said inputs should be contained in final product  : Delhi HC