MODVAT credit cannot be reduced after price revision where duty paid on inputs remains unchanged.

MODVAT credit on inputs could not be denied or reduced merely because the supplier later issued debit notes and the contract price was adjusted downward. The duty had already been paid by the supplier and was reflected in the duty-paying documents used for credit; there was no reopening of the supplier's assessment or refund of excess duty. The recipient's credit entitlement could not be varied by reassessing the supplier's duty liability at the buyer's end. Credit therefore remained available to the extent of the duty shown in the documents.

---

---

Issues: Whether MODVAT credit could be denied to the buyer of inputs on the ground that the price was later reduced by debit notes and the supplier did not seek refund or reassessment of duty.

Analysis: The duty on the inputs had been paid by the supplier and was reflected in the duty paying documents on the basis of which credit was taken. It was not shown that the assessments at the supplier's end had been reopened or that the excess duty had been refunded. The MODVAT scheme does not permit the authority dealing with the recipient's credit to reassess the supplier's duty liability. If duty paid on inputs is found to be short or excess, the remedy lies at the supplier's end, and the credit taken on the basis of the documents cannot be varied merely because of subsequent price adjustment between the parties. The earlier decisions holding that credit cannot be altered where the duty actually paid on inputs remains unchanged were applied, while the decision relied upon by the Department was distinguished because it concerned reassessment and refund at the supplier's end.

Conclusion: MODVAT credit could not be denied or reduced on the facts of the case, and the assessee was entitled to credit of the duty shown in the duty paying documents.

---