Modvat credit on returned inputs was admissible where self-issued invoices were valid and the inputs were used in manufacture.

Modvat credit was treated as admissible where inputs originally cleared on Rule 52A invoices were later returned under the same invoices and used in manufacture of the final product. Rules 57A and 57F(1)(ii) were read together to permit the manufacturer to issue such invoices and claim credit, and the fact that the invoices had been issued by the assessee itself did not by itself bar credit. A departmental circular supported this view and was binding on departmental authorities. The notice did not rely on the time gap between clearance and re-credit as a ground for denial.

---

---

Issues: Whether Modvat credit was admissible when the inputs were originally cleared by the assessee under Rule 52A invoices and later returned by the buyer under the same invoices.

Analysis: The substantive entitlement to credit arose under Rule 57A, while Rule 57F(1)(ii) permitted a manufacturer to clear inputs as if it were the manufacturer thereof and issue Rule 52A invoices. The invoices used for the original clearance were not disputed, and the returned inputs were admittedly used in the manufacture of the final product. Read together, Rules 57A and 57F did not prohibit credit merely because the invoices had been issued by the assessee itself. The departmental circular also supported this position and was binding on the departmental authorities. The time gap between clearance and re-credit was not a basis adopted in the notice to deny credit.

Conclusion: Modvat credit was admissible to the assessee.

---