MODVAT credit remains available despite later duty payment, but procedural compliance still requires fresh examination.

MODVAT credit under Rule 57A was not barred merely because the supplier paid duty on the inputs after they had been received in the factory, since the rule required duty-paid inputs for use in manufacture and did not insist that duty be paid before receipt. Rule 57E was confined to adjustments where duty already paid was later varied by refund, and did not govern this situation. However, the record did not establish compliance with the declaration requirement under Rule 57G, and the claim under Rule 57H could not be fully examined without further facts. The matter therefore required remand for fresh consideration of the remaining procedural conditions.

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Issues: Whether MODVAT credit under Rule 57A could be denied merely because duty on the inputs was paid by the supplier after the inputs were received in the factory, and whether the matter required remand for consideration of the remaining conditions under the MODVAT scheme.

Analysis: Rule 57E, as it then stood, dealt with adjustment of credit where duty already paid on inputs was subsequently varied by refund. It did not specifically cover the situation where the supplier paid duty later on inputs earlier cleared at nil duty. Rule 57A, however, contemplated credit of duty paid on inputs for use in the manufacture of final products, and did not prescribe that the duty must necessarily have been paid before receipt of the inputs. On that basis, the timing of payment of duty by the supplier was not, by itself, a bar to availing MODVAT credit. At the same time, the record did not establish compliance with the declaration requirement under Rule 57G, and the claim under Rule 57H could not be finally examined for want of necessary facts.

Conclusion: The subsequent payment of duty after receipt of the inputs did not preclude MODVAT credit under Rule 57A, but the matter had to be remanded for fresh consideration of the assessee's entitlement under the remaining procedural requirements.

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