Deemed MODVAT credit turns on statutory conditions, not proof that duty was paid by the claimant at purchase.

Deemed MODVAT credit for scrap and re-rollable materials purchased from the Railways depended on satisfaction of the conditions in Rule 57G of the Central Excise Rules, 1944 and the relevant notifications, not on proof that the claimant itself paid duty at purchase. Because the inputs were purchased from the Railways, were not melted before use, and the finished goods fell within Chapter 72, the statutory conditions for deemed credit were met. The denial of credit on the ground of non-payment of duty at the time of purchase was therefore incorrect, and the order granting deemed MODVAT credit was restored.

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Issues: Whether the appellant was entitled to deemed MODVAT credit in respect of scrap and re-rollable materials purchased from the Railways, and whether denial of credit on the ground that the appellant had not paid duty at the time of purchase was sustainable.

Analysis: The applicable framework consisted of Rule 57G of the Central Excise Rules, 1944 and the notifications issued under the second proviso to that rule for re-rollable materials. The material facts showed that the inputs were purchased from the Railways, were not melted before use, and the finished goods fell within Chapter 72 of the Central Excise Tariff Act, 1985. The deemed credit scheme did not require the appellant to have paid duty at the time of purchase; rather, it operated on the basis that duty on the inputs was deemed to have been paid, subject to the prescribed conditions. The Revenue authorities and the High Court denied credit by treating the absence of duty payment by the appellant at purchase as decisive, which was an erroneous approach because the relevant enquiry was whether the statutory conditions for deemed credit were satisfied.

Conclusion: The appellant satisfied the conditions for deemed MODVAT credit and was entitled to the credit under the notifications and Rule 57G.

Final Conclusion: The denial of credit was set aside and the order allowing deemed MODVAT credit was restored in full.

Ratio Decidendi: Where a deemed credit notification issued under Rule 57G applies, entitlement depends on satisfaction of the prescribed statutory conditions, not on proof that the claimant itself paid duty at the time of purchase of the inputs.

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