Deemed Modvat credit denied where invoices showed duty was only "to be discharged," not actually discharged.

Deemed Modvat credit under Notification No. 58/97-C.E. was unavailable because the notification required proof that the inputs had been received directly from the manufacturer and that appropriate duty had actually been discharged on them. The first condition was undisputed, but the invoices only stated that duty liability was "to be discharged" under Rule 96ZP(3), which was not an affirmation of actual discharge of duty. The appellate authority's view that duty had been paid was inconsistent with the invoice wording. Credit was therefore denied and the original disallowance restored.

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Issues: Whether the respondents were entitled to deemed Modvat credit under Notification No. 58/97-C.E. when the invoices only stated that duty liability was "to be discharged" under Rule 96ZP(3), and not that duty had already been discharged.

Analysis: The notification required two conditions to be satisfied: receipt of inputs directly from the manufacturer and discharge of appropriate duty on those inputs by the manufacturer. The first condition was not in dispute. The second condition was not proved, because the invoice declaration did not state that duty had been discharged; it only recorded that duty liability was to be discharged under Rule 96ZP(3). That expression could not be treated as an affirmation of actual discharge of duty. The appellate authority had misread the declaration and its finding that duty had been paid was inconsistent with the wording on the invoices.

Conclusion: The respondents were not entitled to deemed Modvat credit, as the second condition of the notification was not satisfied.

Final Conclusion: The order granting credit was set aside and the original disallowance was restored, resulting in success for the Revenue.

Ratio Decidendi: Where a fiscal exemption or credit notification requires proof that duty has been discharged, a mere statement that duty liability is to be discharged is insufficient unless the document clearly shows actual discharge of duty.

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