Deemed Modvat credit under Notification 58/97-C.E. remains available despite alleged short levy at the supplier's end.

Deemed Modvat credit under Notification No. 58/97-C.E. remained available to the recipient where the supplier operated under the compounded levy scheme and had discharged duty under Rule 96ZP(3). Any allegation of short levy at the supplier's end had to be pursued only by the officers having jurisdiction over the supplier, because the recipient's officers could not re-examine the correctness of the supplier's duty liability for each clearance. The notification granted deemed credit by design, so the recipient was entitled to the benefit and the department's objection failed.

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Issues: Whether deemed modvat credit under Notification No. 58/97-C.E. was available to the recipient when the supplier was working under the compounded levy scheme and had discharged duty under Rule 96ZP(3), notwithstanding the department's allegation of short payment at the supplier's end.

Analysis: The supplier's unit was undisputedly operating under the compounded levy scheme and had discharged duty liability under Rule 96ZP(3). Any dispute as to short levy at the supplier's end lay within the jurisdiction of the officers controlling the supplier unit. The recipient's jurisdictional officers could not sit in judgment over the correctness of the supplier's duty liability. The benefit of deemed credit under Notification No. 58/97-C.E. was not dependent upon re-examination of the duty paid on each clearance by the supplier, because the credit was consciously granted as deemed credit. If there was any short levy, the remedial action had to be taken only against the supplier by the proper jurisdictional officers.

Conclusion: The recipient was entitled to deemed modvat credit under Notification No. 58/97-C.E., and the department's challenge failed.

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