Modvat credit on duty-paid inputs cannot be restricted to duty leviable when the documents show duty actually paid.

Modvat credit on imported, duty-paid inputs was allowable on the duty actually paid as shown in the duty-paying documents, because Notification No. 21/99-C.E. and Rule 57A did not limit credit to the duty merely leviable. The recipient's credit could not be curtailed at its end simply because the supplier may have paid duty in excess of what was strictly payable. The demand for differential credit was therefore unsustainable, and the appellant was entitled to full credit of the duty actually paid, with consequential relief.

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Issues: Whether Modvat credit on inputs imported and duty-paid at the supplier's end could be restricted to the duty leviable instead of the duty actually paid.

Analysis: Notification No. 21/99-C.E. issued under Rule 57A of the Central Excise Rules allowed credit of the specified duty paid on inputs used in the manufacture of final products. The relevant rule and notification did not prescribe any restriction that the credit must be limited to the duty leviable alone. The duty-paying documents showed the duty actually paid, and the credit scheme operated on the duty paid on inputs. The reasoning in the cited decisions also supported the view that credit at the recipient's end cannot be curtailed merely because the supplier paid duty in excess of what was leviable.

Conclusion: The restriction of credit to the duty leviable was not sustainable, and the appellant was entitled to credit of the duty actually paid.

Final Conclusion: The demand for differential credit was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Under the relevant Modvat notification and Rule 57A, credit on inputs is allowable on the duty actually paid as reflected in the duty-paying documents, and it cannot be restricted at the recipient's end to the duty merely leviable.

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