Modvat credit cannot be denied where inputs were duty-paid and the supplier chose not to claim a conditional exemption.

Modvat credit could not be denied merely because the supplier did not claim a conditional exemption notification and instead paid duty on the inputs. The choice to avail the notification rested with the supplier, and once duty had been assessed and paid at the supplier's end, that assessment could not be reopened against the recipient. As the inputs were duty-paid, the recipient was entitled to credit, and denial of Modvat credit was held unsustainable.

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Issues: Whether Modvat credit could be denied to the appellant on the ground that the supplier ought to have availed the benefit of an exemption notification instead of paying duty on the inputs supplied to the appellant.

Analysis: The notification in question was conditional and the choice to avail it rested with the supplier. Once duty had been assessed and paid at the supplier's end, that assessment could not be reopened at the recipient's end. Since the inputs were admittedly duty-paid, the appellant was entitled to take credit.

Conclusion: The denial of Modvat credit was unsustainable and the appeal was allowed.

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