Modvat credit on goods returned from job workers cannot be reduced merely because duty liability of the job worker is disputed.

Modvat credit could not be curtailed where repaired or reconditioned goods were received back from job workers under prescribed statutory invoices and duty had been paid on them. The recipient's jurisdictional authority could not revise or deny the credit merely because it formed a different view on the duty liability of the job worker. The same principle applied to capital goods credit, and the absence of any shortage between the quantity received and the quantity cleared after processing also defeated any reduction of credit on the basis of process loss. The credit claimed was therefore sustainable and the demand restricting it was unsustainable.

---

---

Issues: Whether the appellant was entitled to Modvat credit of duty paid on repaired or reconditioned goods received back from job workers, and whether the jurisdictional authority over the appellant could restrict or revise such credit on the ground that the duty paid by the job worker was not the duty actually payable.

Analysis: The goods were received by the appellant under prescribed statutory invoices and duty had been paid on them. Credit taken on such received goods could not be curtailed by the authority having jurisdiction over the recipient merely because a different view was taken about the duty liability of the job worker. The reasoning applied to capital goods credit as well, and the absence of shortage between the quantity received and the quantity cleared after processing also negatived the attempt to reduce credit on the basis of loss in process.

Conclusion: The appellant was entitled to the credit claimed, and the demand restricting or disallowing that credit was unsustainable.

---