Retrospective deemed Modvat credit for iron and steel inputs was upheld despite missing duty documents.

A statutory direction under the second proviso to Rule 57G(2) of the Central Excise Rules, 1944 provided that ingots and re-rollable iron or steel materials purchased from outside on or after 1-4-1987 would be deemed duty-paid, and Modvat credit could be allowed without duty-paying documents. That direction was held to apply retrospectively from 1-4-1987 and to cover re-rollable waste and scrap for the relevant period. The contemporaneous trade notice was read consistently with that construction, and the Department's narrower interpretation was rejected as contrary to the wording and purpose of the direction. The deemed credit was therefore validly availed and disallowance was unsustainable.

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Issues: Whether deemed Modvat credit on re-rollable waste and scrap of iron or steel for the period 1-4-1987 to 30-8-1987 was legally permissible despite absence of duty-paying documents.

Analysis: A statutory direction issued under the second proviso to Rule 57G(2) of the Central Excise Rules, 1944 expressly provided that ingots and re-rollable materials of iron or steel purchased from outside on or after 1-4-1987 would be deemed to have paid duty at the specified rate and that credit could be allowed without production of documents evidencing payment of duty. The direction was held to cover the period in question and to operate retrospectively from 1-4-1987. The contemporaneous trade notice was treated as consistent with that direction. The contrary construction suggested by the Department was rejected as inconsistent with the clear wording and purpose of the direction.

Conclusion: The deemed Modvat credit was validly availed and the disallowance was unsustainable.

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