Deemed Modvat credit cannot be denied where inputs are sent for job work under delivery challans and covered by Board clarification.

Deemed Modvat credit could not be denied solely because the inputs were not purchased directly by the appellant when the materials were received from another unit for job work under delivery challans. The Tribunal noted that the goods had been purchased from the market by M/s. Jyoti Structures and sent to the appellant for processing, bringing the transaction within a transfer for job work. Relying on the Board's circular dated 1-3-1989, which recognised deemed Modvat credit in cases of both purchase and stock transfer, the Tribunal held that the department's objection was unsustainable and restored the credit.

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Issues: Whether deemed Modvat credit could be denied merely because the inputs were not purchased by the appellant but were received from M/s. Jyoti Structures for job work under delivery challans.

Analysis: The only objection raised by the department was that the appellant had not itself purchased the inputs. The Tribunal noted that M/s. Jyoti Structures had purchased the steel materials from the market and sent them to the appellant for job work. It further relied on the Board's circular dated 1-3-1989 clarifying that deemed Modvat credit was available in cases of purchase as well as stock transfers. The case was treated as one of transfer for job work and was found to be covered by the clarified position.

Conclusion: The denial of deemed Modvat credit was unsustainable and the appeal was allowed with restoration of the credit to the appellant.

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