Modvat credit remains admissible for duty paid after clearance where payment is proved and later amendments are only clarificatory.

Modvat credit remained available where duty on inputs was paid after original clearance, because the timing of payment did not alter the duty-paid character of the inputs. A missing Gate Pass did not by itself defeat credit when other evidence of duty payment was produced. Rule 57E, as amended, was treated as clarificatory and could not narrow the substantive entitlement under the Modvat scheme under Rule 57A. Duty paid later on account of escalation of value was therefore eligible for credit from the inception of the scheme, and the challenge to availment failed.

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Issues: Whether Modvat credit could be denied merely because duty was paid after the original clearance of the inputs and no Gate Pass accompanied such subsequent payment, and whether the amendment to Rule 57E restricted the basic entitlement under the Modvat scheme.

Analysis: Modvat credit is intended to cover duty paid on inputs, and the timing of payment does not change the character of the duty. The absence of a Gate Pass for duty paid later cannot by itself defeat the claim when evidence of payment is otherwise produced. Rule 57E, as amended, was treated as clarificatory and not as enlarging or limiting the substantive scope of the Modvat scheme under Rule 57A. On that basis, duty paid later on account of escalation of value remained eligible for credit from the inception of the scheme.

Conclusion: The credit was admissible and the challenge to its availment failed; the assessee succeeded on the substantive Modvat issue.

Final Conclusion: The appeal was rejected and the order granting Modvat credit was maintained.

Ratio Decidendi: Duty paid on inputs remains eligible for Modvat credit even if paid after clearance, and a later clarificatory amendment cannot curtail the substantive benefit of the scheme.

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