Modvat credit on job-worked inputs must be examined under amended Rule 57E when duty is later varied

Modvat credit on flats received from a job worker was claimed after the duty originally paid was varied pursuant to a departmental demand. The relevant question was whether this post-clearance adjustment of duty on job-work inputs had to be examined under Rule 57E of the Central Excise Rules, because the credit claim arose after that rule was amended. The lower authorities had not considered the claim from that statutory angle, and the matter was remanded to the Assistant Collector for fresh examination of eligibility to credit under Rule 57E.

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Issues: Whether the appellants were entitled to Modvat credit in respect of the duty paid on flats received from the job worker where the duty position was altered by a subsequent demand, and whether the matter required examination under Rule 57E of the Central Excise Rules.

Analysis: There was no dispute that duty had been paid on the flats received from the job worker. The credit was taken after the job worker debited the duty pursuant to the departmental demand. The relevant question was whether a post-clearance variation in duty on the inputs supplied for job work could be adjusted by credit under Rule 57E. As the credit was claimed after the amendment of Rule 57E, the eligibility had to be examined in the light of that provision. The lower authorities had not considered the claim from this angle.

Conclusion: The matter was remanded to the Assistant Collector for reconsideration of the appellants' eligibility to credit under Rule 57E of the Central Excise Rules.

Ratio Decidendi: Where duty on goods received from a job worker is subsequently varied on account of a departmental demand and the credit claim arises after the amendment of Rule 57E, the eligibility for Modvat credit must be examined under Rule 57E.

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