Deemed Modvat credit cannot be denied where only interest remains unpaid and duty has already been paid.

Deemed Modvat credit under Notification No. 58/97 could not be denied merely because only interest, and not duty, remained unpaid. The notification required payment of duty for availing deemed credit and did not make clearance of interest a condition precedent. Since the outstanding amount was interest and duty had been paid, disallowance of the credit was not legally sustainable. The impugned order was set aside and the appeals were allowed.

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Issues: Whether deemed Modvat credit under Notification No. 58/97 could be denied merely because only interest remained unpaid while duty had been paid.

Analysis: The appellants had taken deemed Modvat credit on the strength of invoices and the relevant certificate showed that the outstanding amount was interest and not duty. Notification No. 58/97 contemplated payment of duty for the purpose of deemed credit and did not stipulate payment of interest as a condition for availing such credit. As the notification did not make payment of interest a prerequisite, the disallowance of the credit was not legally sustainable.

Conclusion: The denial of deemed Modvat credit was unsustainable and the appeals were allowed by setting aside the impugned order.

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