Deemed Modvat credit includes sales tax, freight and insurance in input value under the relevant notification.

For computing deemed Modvat credit under Notification No. 58/97-C.E. (N.T.), the value of inputs supplied by a manufacturer under the Compounded Levy Scheme under Section 3A could include sales tax, freight, insurance and similar charges. Board Circular No. 331/47/97-CX dated 30-8-97 clarified that such charges formed part of the input value for calculating 12% deemed Modvat credit under the notification. Applying that circular to the facts, the lower appellate authority accepted credit computed on the expanded value, and the Revenue's challenge was rejected.

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Issues: Whether, for computing deemed Modvat credit under Notification No. 58/97-C.E. (N.T.), the invoice value of inputs supplied by a manufacturer operating under the Compounded Levy Scheme under Section 3A of the Central Excise Act could include sales tax, freight, insurance and similar charges.

Analysis: The Board's Circular No. 331/47/97-CX. dated 30-8-97 was read as ifying that sales tax, freight and similar charges formed part of the value of the inputs for the purpose of calculating 12% deemed Modvat credit under the notification. The respondents had taken credit at 12% of the value so computed, and the lower appellate authority had correctly applied the circular to the facts.

Conclusion: The inclusion of sales tax, freight and similar charges in the input value for computing deemed Modvat credit was upheld, and the Revenue's challenge failed.

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