Modvat credit denial fails where duty paid on the final product exceeds the department's demand and no separate levy is shown.

Modvat credit could not be denied where the assessee had paid duty on tarpaulin under Chapter 39 in an amount exceeding the duty demand worked out by the department on reclassification under Chapter 63. The record also showed no separate demand for the double-side coated fabric captively consumed in the final product. On that factual basis, the proposed denial of credit lacked support and was not sustainable.

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Issues: Whether denial of Modvat credit was justified when the assessee had paid duty on the final product in excess of the duty demanded.

Analysis: The assessee had cleared tarpaulin on payment of duty under Chapter 39, while the notices proposed denial of Modvat credit and demand of duty on reclassification under Chapter 63. The material on record showed that the duty actually paid on tarpaulin exceeded the duty demand worked out by the department, and there was no material to show any separate demand on the double-side coated fabric captively consumed in the final product. On that factual foundation, the denial of credit could not be sustained.

Conclusion: Denial of Modvat credit was not justified and the assessee succeeded.

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