MODVAT credit on reprocessed inputs requires proof that the returned goods are the same inputs earlier sent out.

MODVAT credit on inputs sent out for reprocessing is not admissible unless the assessee can show that the goods received back are the same duty-linked inputs originally removed from the factory. The scheme permits removal of inputs only in the manner prescribed by the rules, and the absence of any specific rule authorising the claimed reprocessing arrangement weighed against restoration of credit. As the appellants failed to produce correlating evidence identifying the returned goods with the inputs earlier sent out, the claim for credit was disallowed.

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Issues: Whether MODVAT credit was admissible on inputs sent out for reprocessing and received back, in the absence of evidence linking the returned goods with the inputs originally removed from the factory.

Analysis: The MODVAT scheme permits removal of inputs only in the manner provided by the relevant rules. The appellants had debited the credit when the inputs were sent out, but no specific provision under the MODVAT rules allowed such removal for reprocessing as claimed. More importantly, the appellants were unable to produce correlating evidence to establish that the goods received back after reprocessing were the same goods earlier sent out. In the absence of such identification and proof, the credit could not be restored or allowed.

Conclusion: MODVAT credit was not admissible to the appellants, and the claim failed.

Ratio Decidendi: A claim for MODVAT credit on reprocessed returned inputs requires proof that the same duty-linked inputs sent out from the factory were received back after reprocessing, and in the absence of such correlation the credit is not allowable.

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