MODVAT credit on later-paid countervailing duty was allowed where imported inputs were initially cleared without duty.

MODVAT credit was available on countervailing duty paid later on imported inputs, because Rule 57E permits credit where duty is discharged subsequently and the scheme is intended to prevent duty cascading on inputs. The initial clearance without duty, having resulted from mistaken assessment, did not exclude the inputs from the rule, and later payment of even a time-barred demand retained its character as duty. The absence of any refund claim also supported admissibility of the credit.

---

---

Issues: Whether MODVAT credit could be taken on countervailing duty paid subsequently on imported inputs that had initially been cleared without payment of duty.

Analysis: The imported inputs were found liable to countervailing duty and the duty was paid later pursuant to demand. The object of the MODVAT scheme is to avoid cascading of duty on inputs, and Rule 57E permits credit where duty is paid subsequently. The fact that the initial clearance was without duty because of a mistaken assessment did not take the case outside the rule. Payment of a time-barred demand did not alter the character of the amount as duty, and the absence of any claim for refund supported availment of credit.

Conclusion: MODVAT credit was admissible to the assessee on the subsequently paid countervailing duty.

---