Modvat credit on DEPB debit entries treated as valid duty payment when endorsed on the Bill of Entry.

Modvat credit was examined in relation to CVD discharged through debit entries in a DEPB pass book, where the Bill of Entry bore the corresponding endorsement. The note treats the endorsed Bill of Entry as a specified and effective duty-paying document under the Modvat scheme, and regards the DEPB debit as equivalent in substance to cash payment. On that basis, denial of credit for want of cash payment was described as a purely formal distinction inconsistent with the object of Modvat, namely avoidance of cascading duty. The stated result is that Modvat credit was admissible on the disputed CVD amount.

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Issues: Whether Modvat credit was admissible on CVD paid through debit entries in the DEPB pass book, when the Bill of Entry carried the endorsement of such debit.

Analysis: The credit claim was examined with reference to the prescribed Modvat procedure and the nature of the document evidencing duty payment. Since the Bill of Entry is a specified document under the Modvat scheme and it reflected the debit made towards CVD under the DEPB mechanism, the payment was treated as effective duty payment. The debit in the DEPB pass book was considered to be equivalent in substance to cash payment, and denial of credit on a purely formal distinction was found inconsistent with the object of Modvat, namely avoidance of cascading of duty.

Conclusion: Modvat credit was admissible, and the denial of credit was unsustainable.

Final Conclusion: The assessee was entitled to the Modvat benefit on the disputed CVD amount, and the appeal succeeded with consequential relief.

Ratio Decidendi: Where duty payment is evidenced by a Bill of Entry endorsed with DEPB debit entries, such debit is to be treated as effective duty payment for Modvat purposes and credit cannot be denied merely because the duty was not paid in cash.

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