Modvat credit on duty-paid capital goods cannot be denied merely because the supplier's valuation was questioned.

Modvat credit on capital goods was admissible where duty-paid goods were received under proper duty-paying documents and satisfied the statutory conditions for credit. The recipient could not be denied credit merely because the supplier or job worker had paid duty on a valuation that the recipient authorities considered incorrect, since they could not reassess that assessable value at the recipient's end. Credit was therefore allowed and denial of Modvat credit was not justified.

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Issues: Whether Modvat credit on capital goods was admissible where the job worker discharged duty on the value including both the job charges and the value of the used brass tubes.

Analysis: The appellant had received duty-paid capital goods falling within the relevant definition and had used them in manufacture. The duty had been paid by the supplier/job worker on the basis adopted by him, and the recipient authorities could not sit in appeal over or reassess that valuation at the appellant's end. The earlier Division Bench view recognised that once duty is assessed and paid by the proper authority, credit cannot be denied merely because the recipient considers the valuation incorrect. The facts satisfied the conditions for availment of Modvat credit.

Conclusion: Modvat credit was admissible and the denial of credit was not justified.

Ratio Decidendi: Where duty has been validly paid by the supplier on goods received under the duty-paying document and the statutory conditions for Modvat credit are satisfied, the recipient cannot be denied credit on the ground that the supplier's assessable value ought to have been different.

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