Deemed Modvat credit under the Compounded Levy Scheme accepted where duty payment and documentary proof were sufficient.

Deemed Modvat credit on inputs from iron and steel manufacturers under the Compounded Levy Scheme was available where duty had been paid on the basis of provisional annual capacity under Rule 96ZP(3) read with Section 3A of the Central Excise Act, 1944. The Tribunal held that such provisional payment could not be rejected merely because final annual capacity had not yet been settled, and the notification did not require a Range Officer's certificate from the input manufacturer. An invoice declaration showing discharge of duty liability, or a supplementary certificate curing any deficiency, was sufficient. On that basis, the appellant made out a strong prima facie case for unconditional waiver of pre-deposit and stay of recovery.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery in respect of the demand arising from denial of deemed Modvat credit on inputs received from iron and steel manufacturers operating under the Compounded Levy Scheme.

Analysis: The deemed credit notification applied to inputs received from manufacturers paying duty under Rule 96ZP(3) read with Section 3A of the Central Excise Act, 1944. The Tribunal noted that the input manufacturers were admittedly operating under the Compounded Levy Scheme and were paying duty on the basis of provisional annual capacity of production determined by the jurisdictional Commissioner. It held that payment on the basis of provisional annual capacity could not be treated as inappropriate merely because final annual capacity had not yet been settled. The Tribunal further found that the notification did not expressly require a certificate from the Range Officer having jurisdiction over the input manufacturer, and denial of credit on that ground was not justified. It also observed that an invoice declaration of discharge of duty liability, or a supplementary certificate issued by the manufacturer curing the deficiency, was sufficient for the purpose of the notification.

Conclusion: The appellant established a strong prima facie case and was entitled to unconditional waiver of pre-deposit and stay of recovery.

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