Deemed Modvat credit turns on proof that inputs were clearly recognisable as non-duty paid; absent that, credit is allowed.

Deemed Modvat credit was denied where the department showed that the Zinc Alloy Ingots were clearly recognisable as non-duty paid, because the assessee did not dispute the enquiry findings and the credit was therefore inadmissible. By contrast, credit on Zinc purchased from the job worker was allowed because there was no allegation or material showing it was clearly recognisable as non-duty paid, and the assessee received the benefit of the deemed credit scheme. Credit on Zinc thimbles and the admitted non-allowable amount was also sustained, leaving only partial relief on the job-worker purchases.

---

---

Issues: (i) Whether deemed Modvat credit was admissible on 6.0078 M.T. of Zinc Alloy Ingots purchased from M/s. Century Aluminium Manufacturing Company Ltd.; (ii) whether deemed credit was admissible on 13.189 M.T. of Zinc purchased from the job worker, M/s. Capso Engineers; and (iii) whether credit on Zinc thimbles and the admitted excess demand was sustainable.

Issue (i): Whether deemed Modvat credit was admissible on 6.0078 M.T. of Zinc Alloy Ingots purchased from M/s. Century Aluminium Manufacturing Company Ltd.

Analysis: The show cause notice recorded that an enquiry with the supplier revealed that the Zinc Alloy Ingots were non-duty paid. The assessee did not dispute that factual assertion in reply and did not seek the enquiry report. On that basis, the material before the authority was treated as sufficient to show that the goods were clearly recognisable as non-duty paid, making the credit inadmissible.

Conclusion: The credit on 6.0078 M.T. of Zinc Alloy Ingots was held to be inadmissible and the demand on that count was sustained.

Issue (ii): Whether deemed credit was admissible on 13.189 M.T. of Zinc purchased from the job worker, M/s. Capso Engineers.

Analysis: There was no allegation or material showing that this quantity of Zinc was clearly recognisable as non-duty paid. No enquiry against the job worker was shown to have been made on this point. In the absence of such material, the assessee was found entitled to the benefit of the Deemed Credit Order then in force.

Conclusion: The credit on 13.189 M.T. of Zinc was held admissible and the demand on that count was set aside.

Issue (iii): Whether the credit on Zinc thimbles and the admitted excess demand was sustainable.

Analysis: The credit on Zinc thimbles was not disputed by the assessee and was found not allowable. The amount relatable to the admitted non-allowable items was therefore confirmed.

Conclusion: The demand relating to Zinc thimbles and the admitted amount was sustained.

Final Conclusion: The appeal succeeded only in part, with relief confined to the credit on Zinc obtained from the job worker, while the balance demand was upheld.

Ratio Decidendi: Deemed Modvat credit is allowable unless the department shows that the inputs were clearly recognisable as non-duty paid; where such material exists, the credit fails, but in its absence the assessee is entitled to the benefit of the governing deemed credit scheme.

---