Modvat credit on job-worked goods upheld where no duplication of duty burden arose

Modvat credit was allowed where goods were sent to a job worker under the prescribed procedure and the principal manufacturer had already debited the specified amount on removal. Credit on duty paid by the job worker was also valid because the job worker had not taken Modvat credit on the same inputs, so there was no duplication of the duty burden. On those facts, taking credit on both the original input duty and the duty paid after processing did not create an impermissible double benefit, and the allegation of double credit was rejected.

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Issues: Whether Modvat credit was correctly availed when the principal manufacturer took credit on duty paid on inputs and also on duty paid by the job worker, and whether such availment amounted to double credit.

Analysis: The goods were sent to the job worker under the prescribed procedure and the assessee had already debited the specified amount at the time of removal. The duty paid by the job worker was also taken as credit. The record showed that the job worker had not availed Modvat credit on the same goods. In these circumstances, the taking of credit on both the original input duty and the duty paid by the job worker did not result in any impermissible double benefit.

Conclusion: The Modvat credit was held to be correctly taken and the allegation of double credit was rejected.

Ratio Decidendi: Where the job worker has paid duty on processed goods and has not availed Modvat credit on the same inputs, the principal manufacturer may take credit of that duty and the credit cannot be denied on the ground of double availment absent duplication of the same duty burden.

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