Modvat credit on later duty payment was admissible where subsequent assessment increased the input duty liability.

Modvat credit was treated as admissible on excise duty paid after clearance of inputs where the later payment arose from escalation or finalisation of duty liability. Rule 57A was read as covering duty paid on inputs used in or in relation to manufacture, not only duty paid at the original clearance stage, and Rule 57E as then in force was not construed to exclude such credit. The two provisions were harmonised, and the later amendments were understood as clarifying and expanding the adjustment mechanism for upward duty variation. Duly authenticated subsequent duty payments therefore qualified for credit, and the Revenue's challenge failed.

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Issues: Whether Modvat credit was admissible in respect of duty paid subsequent to clearance of the goods, and whether the contemporaneous position of Rule 57E excluded such credit before its amendment.

Analysis: Rule 57A allowed credit of excise duty paid on inputs used in or in relation to manufacture, and the provision was not confined to duty paid only at the time of original clearance. In cases involving escalation bills and later finalisation of duty liability, the duty paid subsequently formed part of the duty eligible for credit. Rule 57E, as it stood prior to its amendments, did not bar such credit; the later amendments merely clarified and expanded the mechanism for upward adjustment. The two rules were construed harmoniously, and the subsequent duty payments, being duly authenticated, were held to qualify for Modvat credit.

Conclusion: Modvat credit was held admissible to the assessee on duty paid after clearance, and the appeals by the Revenue failed.

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