Deemed Modvat credit under exemption notification depends on proof of actual duty payment and fair rebuttal opportunity.

Deemed Modvat credit under Notification No. 58/97-Central Excise was treated as conditional on invoices showing that appropriate excise duty had in fact been paid. The benefit of the notification was available only when the supplier's duty liability under Section 3A was actually discharged at the prescribed rate. Because the Central Excise Division's verification report had not been confronted to the respondents, the record was insufficient for a final determination. The matter was therefore remanded for fresh adjudication after giving the parties an opportunity to rebut the material and verify whether the suppliers had paid the appropriate duty.

---

---

Issues: Whether deemed Modvat credit under Notification No. 58/97-Central Excise was admissible when the supplier's actual discharge of duty liability under Section 3A was in dispute.

Analysis: Notification No. 58/97 permits deemed duty credit only for inputs covered by invoices declaring that appropriate excise duty has been paid. The entitlement is conditional upon compliance with the notification's requirements. The principle governing exemption notifications is that the benefit is available only when the duty has in fact been paid at the appropriate rate. As the verification report from the Central Excise Division was not confronted to the respondents, the matter required reconsideration after giving an opportunity to rebut the material and after ascertaining whether the three suppliers had discharged the appropriate duty.

Conclusion: Deemed Modvat credit could not be finally upheld on the existing record, and the matter was remanded for fresh adjudication after following the principles of natural justice.

---