Deemed Modvat credit remains available when notification conditions are met, even if the input-manufacturer's duty liability is disputed.

Deemed Modvat credit under Notification No. 58/97-CE was treated as admissible where inputs were received under statutory invoices and the notification's substantive conditions were met. The purchaser's entitlement to credit was held not to depend on whether the input-manufacturer, operating under the compounded levy scheme, had actually discharged or finally been assessed for duty, and a declaration that duty would be discharged under Rule 96ZP(3) did not defeat credit. The controversy over the manufacturer's duty liability was treated as distinct from the recipient's credit entitlement, so denial of credit on that ground was rejected.

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Issues: Whether deemed Modvat credit under Notification No. 58/97-CE was admissible when the input-manufacturer, covered by the compounded levy scheme, had not actually discharged duty liability and the invoices carried a declaration that duty liability was to be discharged under Rule 96ZP(3) of the Central Excise Rules, 1944.

Analysis: The inputs were received directly from the manufacturer's factory under statutory invoices. The appellate authority held that credit of deemed duty paid under Section 3A of the Central Excise Act, 1944 was available where the substantive requirements of the notification were met, and that the benefit could not be denied merely because the manufacturer's duty liability was disputed or not finally determined at the time of issue of invoices. The view was supported by earlier judicial authority holding deemed credit admissible on similar declarations, and the controversy regarding the input-manufacturer's capacity assessment was held to be unrelated to the purchaser's entitlement to credit.

Conclusion: Deemed Modvat credit was admissible and could not be denied on the ground of non-discharge of duty by the input-manufacturer. The question of law was answered against the revenue.

Final Conclusion: The appeal failed, and the revenue's challenge to the grant of deemed credit was rejected.

Ratio Decidendi: Where the substantive conditions of the deemed credit notification are satisfied, credit cannot be denied to the purchaser merely because the input-manufacturer's duty liability under the compounded levy scheme is disputed or not finally discharged.

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