I am directed to forward herewith copies of Notification Nos. 132/94-CE, 133/94-CE, 60/94-CE (N.T.) to 60/94-CE (N.T.) issued in the context of solving the difficulties in availing of Modvat credit in respect of certain textile inputs.

2.     Under the Modvat scheme, credit of duty paid on the specified input, is allowed as credit for payment of duty on the specified outputs. In some cases, in the process of manufacture, certain intermediate products come into existence. Modvat benefits are not denied so long as such intermediates are also specified. But, if the intermediate product is not specified in the Modvat Scheme, no input duty credit is allowed even though both the inputs and the outputs are covered under the Modvat Scheme. For example carded or combed cotton, containing synthetic staple fibre and falling under heading No.52.02 is used for spinning blended yarns. It has been represented that though both synthetic fibres and the yarn are specified, the credit of duty paid on synthetic staple fibre being denied in some Collectorates for the reason that heading No. 52.02 does not find mention as input/output in various notifications under the Modvat Scheme. There have been similar problems in respect of some other inputs also.

3.     To obviate the difficulties, following changes have now been made:

 (i)    Scoured wool falling under heading No. 51.01 and carded wool falling under heading 51.02 used in their manufacture of woollen yarn have been specified as input and output under rule 57A and as output under rule 57Q;

 (ii)   Carded/ Combed cotton falling under heading No. 52.02 and waste of heading No.52.01used in the manufacture of spun yarns have been specified as input and output under rule 57 A and as an output under rule 57Q.

 (iii)   Unprocessed woollen fabrics falling under heading No.51.06 used in the manufacture of processed woollen fabrics has been specified as input under rule 57A.

 (iv)   Covered rubber thread falling under heading No.56.04 and covered spandex yarn falling under heading No.56/06 used in the manufacture of narrow woven fabrics have been specified as input under rule 57A.