Deemed Modvat credit cannot be denied for a supplier's unpaid interest on delayed duty, with remedy lying against the supplier.

Deemed Modvat credit taken on the strength of invoices could not be denied merely because the supplier had not paid interest on delayed payment of duty on the inputs. The Tribunal treated the issue as covered by its earlier ruling that interest for delayed discharge of duty is not part of the duty itself, so the supplier's failure to pay interest did not affect the recipient's otherwise lawful credit entitlement. Any remedy for such omission lay against the supplier, not by disallowing credit to the recipient. Accordingly, the appellant's deemed Modvat credit was upheld.

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Issues: Whether deemed Modvat credit taken on the strength of invoices could be disallowed merely because the supplier had not paid interest on delayed payment of duty on the inputs.

Analysis: The Tribunal found the facts to be identical to an earlier decision in which it had been held that interest payable for delayed discharge of duty is not part of the duty itself. On that basis, the supplier's omission to pay interest could not be used to deny the recipient's otherwise lawful entitlement to deemed Modvat credit. The Revenue's remedy, if any, lay against the supplier.

Conclusion: Deemed Modvat credit was correctly taken by the appellant and could not be disallowed on the ground that the supplier had not paid interest on delayed duty.

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