Modvat notional credit under Rule 57B cannot be denied by questioning the supplier's duty liability.

Rule 57B of the Modvat scheme allows higher notional credit on inputs received from a small scale manufacturer, and the recipient's entitlement is determined by the Modvat rules rather than by re-examining the supplier's duty position. The excise authorities cannot go behind the duty reflected on the gate passes or reopen the supplier's liability; any challenge to the supplier's duty assessment lies only against that supplier. As no provision was shown to deny the additional notional credit, the restriction was unsustainable and the assessee was entitled to the benefit claimed.

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Issues: Whether higher notional Modvat credit under Rule 57B of the Central Excise Rules could be denied to the recipient on the ground that the suppliers might have been entitled to clear the inputs without duty and, consequently, whether the excise authorities could examine the correctness of duty paid by the suppliers.

Analysis: The Modvat scheme permits credit on the duty reflected by the gate passes and, where inputs are received from a small scale manufacturer, higher notional credit is allowable under Rule 57B. The recipient's entitlement is governed by the Modvat rules and the authorities cannot go behind the duty paid on the inputs or re-open the supplier's liability to duty; any such action lies only against the supplier's unit. Since the department did not dispute the admissibility of credit corresponding to the duty actually paid and only objected to the additional notional credit, and there was no provision cited to deny that benefit, the restriction was unsustainable. As a beneficial scheme, Modvat provisions must be given full effect unless expressly curtailed.

Conclusion: The denial of higher notional credit was not justified and the assessee was entitled to the benefit claimed.

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