Modvat credit on capital goods depends on supplier-side classification, and recipient authorities cannot unilaterally reclassify the goods.

Modvat credit on capital goods depends on the tariff classification shown in the supplier's invoice at the relevant time. Where the goods were recorded under Heading 84.31, credit was not available under Rule 57Q(1) unless the assessee first established that the invoice carried an incorrect entry and that the goods were properly classifiable under a heading eligible for credit. The assessing authority at the recipient's end cannot unilaterally reclassify goods manufactured in another jurisdiction; that classification must be determined by the competent authority having jurisdiction over the supplier's factory. Fresh determination was directed after giving the assessee an opportunity to produce the correct classification.

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Issues: Whether capital goods classified in the supplier's invoice under Heading 84.31 and declared accordingly by the assessee were eligible for Modvat credit under Rule 57Q(1), and whether the Assistant Commissioner at the assessee's end could revise the classification of the goods for that purpose.

Analysis: Eligibility for Modvat credit had to be examined with reference to the classification applicable to the goods on the date of the invoice. Goods falling under Heading 84.31 were not specified for credit under Rule 57Q(1) during the relevant period. The assessee could have claimed credit by showing that the supplier's invoice carried an incorrect Tariff entry and that the goods were correctly classifiable under a heading covered by Rule 57Q(1). Instead, the Assistant Commissioner at the assessee's end undertook reclassification, though classification of goods manufactured in another jurisdiction lay with the proper authority having jurisdiction over the supplier's factory.

Conclusion: The invoice-based classification could not be revised by the Assistant Commissioner at the assessee's end, and the goods as shown in the record were not eligible for Modvat credit on the material placed before the appellate authority.

Final Conclusion: The matter was sent back for fresh determination with an opportunity to the assessee to establish the correct classification from the supplier's jurisdictional excise authorities and then seek credit, if otherwise admissible.

Ratio Decidendi: For Modvat credit on capital goods, the relevant classification must be established by the competent authority having jurisdiction over the supplier's factory, and the assessing authority at the recipient's end cannot unilaterally revise that classification.

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