Deemed MODVAT Credit denied for aluminium alloy castings received as non-duty-paid goods despite duty-paid raw material

Aluminium alloy castings received without payment of duty were not eligible for deemed MODVAT credit, even though they were manufactured from duty-paid ingots. The credit scheme applied only to specified inputs that were duty-paid or deemed to be duty-paid under the governing conditions, and it excluded goods that were clearly recognisable as non-duty paid. A duty-paid character in the original raw material did not extend credit to the finished castings themselves, and credit was also unavailable where the goods were exempt or liable to nil duty. The disallowance of MODVAT credit on the castings was therefore justified.

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Issues: Whether aluminium alloy castings received without payment of duty, though manufactured from duty-paid ingots, were eligible for deemed MODVAT credit under the relevant exemption and credit provisions.

Analysis: The credit scheme permits set-off only in respect of specified inputs that are duty-paid or are deemed to be duty-paid under the prescribed conditions. The castings in question were received under invoices showing no payment of duty and were clearly recognisable as non-duty paid. The fact that the raw material used for manufacturing the castings may have suffered duty did not justify extending credit to the finished inputs themselves. The rule governing deemed credit also excluded stocks clearly recognisable as non-duty paid, and credit was not available where the goods were exempt or chargeable to nil rate of duty.

Conclusion: The appellants were not entitled to MODVAT credit on the aluminium alloy castings, and the disallowance was .

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