Modvat credit stays available after debit-note price reduction when duty was paid on the original invoice and no refund was claimed.

Modvat credit remained admissible where the supplier had paid duty on the original invoiced value and no refund had been claimed, even though the input value was later reduced by debit notes. The reduced transaction value affected the duty that might otherwise have been payable, but it did not displace the factual basis that duty had already been discharged on the inputs received by the assessee. Since Rule 57A allowed credit of duty paid by the input manufacturer, the assessee could not be denied credit merely because the price was revised downward after clearance.

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Issues: Whether Modvat credit was admissible where the value of inputs was subsequently reduced by debit notes, but the supplier had already paid duty on the original invoiced value and had not claimed refund.

Analysis: The dispute turned on the distinction between duty actually paid and duty that may have been payable after the later reduction in the value of the inputs. The reduction in transaction value affected the quantum of duty that ought to have been payable, but it did not alter the factual position that the supplier had already discharged duty on the inputs received by the assessee. Rule 57A permitted credit of duty paid by the input manufacturer, and the record showed no refund had been claimed by the supplier on account of the reduced assessable value. On that basis, the credit taken by the assessee could not be denied merely because the price of the inputs was later revised downward.

Conclusion: The assessee was entitled to retain the full Modvat credit and the denial of credit was unsustainable.

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