Deemed Modvat credit under compounded levy invoices cannot be denied merely because the supplier's duty payment is disputed.

Deemed Modvat credit under Notification No. 58/97-CE was available where inputs were received under invoices referring to duty payment under the compounded levy scheme in Rule 96ZP(3). The Tribunal treated invoices stating that duty liability had been discharged, or was to be discharged, as legally equivalent because both reflected the same deferred duty mechanism under Section 3A of the Central Excise Act, 1944. It held that the recipient could not be denied credit merely because the Revenue disputed the supplier's duty payment; any challenge had to be pursued against the supplier. Credit was therefore admissible and denial of credit was unsustainable.

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Issues: Whether the appellant was entitled to deemed Modvat credit under Notification No. 58/97-CE when the input supplier was operating under the compounded levy scheme and the invoices described the duty position under Rule 96ZP(3).

Analysis: The Notification granted deemed Modvat credit on inputs received under invoices declaring payment of appropriate excise duty under Section 3A of the Central Excise Act, 1944. The supplier was working under the compounded levy scheme, under which duty was discharged at the end of the month and not at the time of each clearance. The Tribunal held that the wording used in the invoices, whether stating that duty liability had been discharged or was to be discharged under Rule 96ZP(3), did not alter the legal position, because both related to the same statutory scheme and the same deferred duty mechanism. Relying on earlier Tribunal and High Court decisions, it was held that the recipient could not be denied credit merely because the Revenue disputed the supplier's payment of duty; any such action had to be taken against the supplier.

Conclusion: The appellant was entitled to the deemed Modvat credit, and denial of credit was unsustainable.

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