Deemed Modvat credit denied on exempt galvanised wires; nil-duty inputs fell within the exclusion and no estoppel applied.

Galvanised wires cleared under an exemption notification were treated as inputs liable to the deemed credit exclusion for goods clearly recognisable as non-duty paid or charged to nil rate of duty. The deemed Modvat credit scheme was held to be only a procedural relaxation dispensing with duty-paying documents, not the substantive requirement that the input bear duty. Exempted goods could therefore fall outside the credit scheme, and the assessees had to establish that the inputs were duty paid. The departmental clarification was held non-binding, and no estoppel could operate against law; credit was disallowed.

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Issues: Whether galvanised wires obtained from manufacturers clearing goods under exemption notification could be treated as inputs clearly recognisable as non-duty paid or charged to nil rate of duty so as to deny deemed Modvat credit under the relevant deemed credit order.

Analysis: The order held that the expression non-duty paid is not confined to clandestinely removed goods and, in the Modvat context, nil duty under an exemption notification does not necessarily amount to duty paid for the purpose of credit. The deemed credit scheme was treated as a limited procedural relaxation that waives production of duty-paying documents, not the underlying requirement that the input should bear duty. The order further held that goods exempted by notification may fall within the exclusion for inputs charged to nil rate of duty, that the earlier and later deemed credit orders may be read consistently, and that the appellants, claiming the benefit, had to establish that the inputs were duty paid. The departmental clarification relied on by the appellants was held not binding, and no estoppel could operate against law.

Conclusion: Deemed Modvat credit on the galvanised wires was not admissible, and the disallowance of credit was upheld.

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