Deemed Modvat credit under compounded levy scheme depended on proof of duty discharge through jurisdictional Range Officer certification.

Where invoices under the compounded levy scheme indicated that duty liability had not yet been discharged, deemed Modvat credit was treated as dependent on proof of actual duty payment, preferably through a certificate from the jurisdictional Range Officer. Certificates issued only by the manufacturers were not treated as sufficient for the disputed portion, while the rejection of some produced certificates and the impact of non-finalisation of annual production capacity left the credit issue arguable at the appeal stage. On that basis, a conditional pre-deposit was directed and recovery of the remaining demand and penalty was stayed pending appeal.

---

---

Issues: Whether deemed Modvat credit could be denied where the invoices issued by input-manufacturers under the compounded levy scheme did not contain a declaration of duty payment, and whether production of certificates from the jurisdictional Range Officer was necessary to establish discharge of duty liability for availing such credit.

Analysis: The invoices on which credit was claimed showed that the duty liability under Rule 96ZP(3) was yet to be discharged. For a part of the credit, certificates from the jurisdictional Range Office had been produced, but the denial was based on the view that those certificates were not categorical enough. For the balance, no such Range Officer certificates were produced, though certificates from the manufacturers themselves were filed. On a prima facie reading of the notification, where the invoice itself indicates that duty liability remains to be discharged, the claimant must establish actual discharge of duty by producing a certificate from the jurisdictional Range Officer. At the same time, the non-consideration of the produced certificates and the argument that the credit should not be restricted by extraneous factors arising from non-finalisation of annual capacity of production left the matter arguable at the appeal stage.

Conclusion: The applicants were required to deposit Rs. 1,00,000, and upon such deposit, the remaining pre-deposit of duty and penalty was waived and recovery stayed pending appeal.

---