Deemed credit on stock inputs under the notification was recognised, but payment-condition compliance needed fresh factual verification.

Deemed credit under Notification No. 29/2000-C.E. (N.T.) was available for declared inputs lying in stock on 1-4-2000, because the notification treated duty as deemed paid and allowed credit at 12% of the invoice price. A contrary view denying the benefit solely because the inputs were received before that date was incorrect. However, the additional objection that payment had not been made by cheque, bank draft, or banker's cheque required factual verification, as the record did not properly examine that condition. The matter was therefore remanded for a fresh speaking order after giving the assessee due opportunity.

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Issues: Whether the assessee was entitled to deemed credit under Notification No. 29/2000-C.E. (N.T.) in respect of inputs lying in stock on 1-4-2000, and whether the matter required verification of the notification conditions relating to payment by cheque, bank draft, or banker's cheque.

Analysis: The notification provided for deemed payment of duty on declared inputs and allowed credit of the deemed duty at 12% of the invoice price. The Board circular issued contemporaneously supported this construction. The earlier view denying the benefit merely because the inputs were received prior to 1-4-2000 was held to be incorrect. The record also did not support the additional ground relied upon in the appellate order regarding non-production of evidence of direct payment by the prescribed modes. Since the assessee asserted cheque-based payment and the condition had not been properly examined by the lower authority, factual verification was necessary. The matter therefore had to go back for a fresh speaking order after giving due opportunity.

Conclusion: The assessee was held entitled to consideration of deemed credit under the notification, but the matter was remanded to verify compliance with the payment condition and pass a fresh order in accordance with natural justice.

Final Conclusion: The demand and penalty were not finally affirmed, and the dispute was returned for limited factual verification on eligibility to the deemed credit benefit.

Ratio Decidendi: Credit under the notification is to be computed on the basis of the deemed duty mechanism prescribed therein, and denial of the benefit cannot rest on an unexamined ground without proper factual verification and a reasoned order.

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