Deemed credit under compounded levy cannot be denied without reliable proof of supplier duty default.

Deemed credit could not be denied merely because the supplying unit, operating under the compounded levy scheme, was alleged not to have discharged duty. Where invoices declared clearance under Rule 96ZP(3) and credit was claimed under Notification No. 58/97 read with Rule 57A(6) of the Central Excise Rules, 1944, the invoice declaration was treated as sufficient proof of duty discharge for credit purposes. In the absence of reliable departmental evidence showing non-payment by the supplier, denial of deemed credit was not justified, and the recipient remained entitled to the credit.

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Issues: Whether deemed credit could be denied to the recipient of inputs merely on the ground that the supplying unit, working under the compounded levy scheme, had allegedly not discharged the appropriate duty, despite the invoices carrying the declaration that the goods were cleared under Rule 96ZP(3) and credit being claimed under Notification No. 58/97 read with Rule 57A(6) of the Central Excise Rules, 1944.

Analysis: The inputs were received under invoices issued by a unit operating under the compounded levy scheme, and the invoices declared that the goods were cleared under Rule 96ZP(3). The duty liability of such a unit is discharged in advance on the basis determined by the Commissioner, and the correctness of duty payment by the supplying unit could not be summarily negatived by the Superintendent in charge of that unit. In the absence of reliable evidence from the Department showing that no duty had been discharged by the supplier, the denial of deemed credit was not justified. The invoice declaration was accepted as sufficient proof of discharge of duty liability for the purpose of availing the credit.

Conclusion: The denial of deemed credit was unsustainable and the assessee was entitled to the credit.

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