Modvat credit on later-paid input duty allowed when assessable value is revised and differential duty is paid.

Modvat credit was available under Rule 57E where duty on inputs was paid later after the assessable value of those inputs was revised upward and differential central excise duty became payable. The presence of the jurisdictional Superintendent's certificate for the relevant invoices and debit notes cured the procedural defect. The fact that the enhanced duty arose from royalty or trade mark usage included in the assessable value did not defeat credit, because the additional duty related to the very inputs received and used. The stated principle is that subsequent duty payment on the same inputs attracts credit under Rule 57E, subject to proper documentary support.

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Issues: (i) whether Modvat credit of duty paid subsequently on inputs was admissible under Rule 57E of the Central Excise Rules, 1944 when the assessable value of the inputs was later redetermined and additional duty was paid; (ii) whether the absence of physical visibility of the royalty or trade mark usage element in the inputs could defeat the claim to Modvat credit.

Issue (i): whether Modvat credit of duty paid subsequently on inputs was admissible under Rule 57E of the Central Excise Rules, 1944 when the assessable value of the inputs was later redetermined and additional duty was paid.

Analysis: Rule 57E provided for adjustment of credit where the duty paid on inputs, on which credit had already been taken under Rule 57A, was varied subsequently and more duty became recoverable from the manufacturer of the inputs. The record also showed that the assessee had produced the jurisdictional Superintendent's certificate covering each invoice and debit note for the differential duty, and the procedural defect stood regularized. In these circumstances, the later payment of additional duty on the same inputs attracted Rule 57E.

Conclusion: The credit was admissible in favour of the assessee.

Issue (ii): whether the absence of physical visibility of the royalty or trade mark usage element in the inputs could defeat the claim to Modvat credit.

Analysis: The additional duty did not arise on a separate or invisible item as such, but on the concentrates themselves after inclusion of royalty or trade mark usage fee in their assessable value. Since the enhanced duty related to the very inputs received and used by the assessee, the nature of the fee did not disqualify the credit claim.

Conclusion: The objection was rejected in favour of the assessee.

Final Conclusion: The impugned order was unsustainable and the assessee was entitled to Modvat credit of the subsequently paid differential duty on the inputs.

Ratio Decidendi: Where additional central excise duty is paid later on inputs because their assessable value is revised upward, Modvat credit is available under Rule 57E, and procedural irregularities stand cured when the requisite jurisdictional certificate is produced.

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