Modvat credit blocked by supplier classification where ineligible heading governed and receiving authority could not reclassify goods.

Modvat credit on capital goods was denied because the goods were classified at the supplier's end under Heading 8422.10, which made them ineligible under Rule 57Q. The receiving Assistant Commissioner had no authority to alter the manufacturer's classification for credit purposes, as classification rests with the excise authority having jurisdiction over the manufacturer. On that basis, the denial of credit was upheld and the assessee's challenge failed.

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Issues: Whether Modvat credit on capital goods could be allowed when the supplier classified the goods under a heading making them ineligible for credit, and whether the receiving authority could alter that classification.

Analysis: The credit claim turned on the classification adopted at the supplier's end. The order under challenge held that the product was properly classifiable under Heading 8422.10, and goods under that heading were not eligible for Modvat credit under Rule 57Q. It was also held that the Assistant Commissioner, dealing with the receiver's case, had no authority to change the supplier's classification. In view of the settled position that the excise authority having jurisdiction over the manufacturer of the inputs is the proper authority to classify them, the contrary view taken by the appellant could not be accepted.

Conclusion: The denial of Modvat credit was upheld and the issue was decided against the assessee.

Final Conclusion: The appeal failed, and the order denying credit was sustained.

Ratio Decidendi: The excise authority receiving the goods cannot reclassify inputs classified by the manufacturer for the purpose of allowing Modvat credit, and credit is unavailable where the adopted classification makes the goods ineligible under the relevant rule.

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