Modvat credit on capital goods upheld where duty payment and exclusion from the lease amount satisfied Rule 57R(3) compliance.

Modvat credit on capital goods was treated as admissible where the assessee produced a manufacturer's certificate showing payment of excise duty and a finance company certificate stating that the lease amount excluded duty and that the duty was separately paid by the assessee. On that factual record, the requirement of Rule 57R(3) of the Central Excise Rules was found satisfied, because the lease arrangement did not contradict the ement of duty payment by the assessee. The order dropping the proceedings was therefore found free from infirmity, and the Revenue's challenge failed.

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Issues: Whether Modvat credit on capital goods was admissible when the assessee produced evidence showing that excise duty had been paid by it and that the duty amount was excluded from the lease arrangement, in compliance with Rule 57R(3) of the Central Excise Rules.

Analysis: The respondents produced a certificate from the manufacturer showing payment of excise duty and also a certificate from the finance company stating that the lease amount did not include excise duty and that the duty was separately paid by the respondents. On the factual record, the duty on the capital goods stood established as paid by the respondents, and the lease agreement did not negate that position. In these circumstances, no infirmity was found in the order dropping the proceedings.

Conclusion: The requirement under Rule 57R(3) was treated as satisfied, and the Revenue's challenge failed.

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