Modvat credit denied for factory-bought inputs lacking duty documents and treated as clearly non-duty paid under the scheme.

Modvat credit was held inadmissible on copper scrap, copper wire and aluminium ingots purchased from a factory without any duty-paying document. The governing orders and Modvat scheme were read to deny credit where inputs are clearly recognisable as non-duty paid, and that phrase was construed broadly to cover goods on which duty had not been paid for any reason, including nil rate, exemption, or other patent non-payment. On the facts, the absence of duty documents supported the inference that duty had not been paid, so the denial of deemed credit was upheld.

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Issues: Whether deemed Modvat credit was admissible on copper scrap, copper wire and aluminium ingots where the inputs were purchased from the factory and no duty paying document was produced, and whether such goods could be treated as clearly recognizable as non-duty paid.

Analysis: The governing orders and the Modvat scheme were construed to mean that credit is unavailable where the inputs are clearly recognizable as non-duty paid. The expression was read broadly to cover situations where duty had in fact not been paid for any reason, including nil rate, wholesale exemption, or other cases where non-payment of duty is patent. On the facts, the goods were bought from the factory and no duty paying documents were produced, supporting the inference that duty had not been paid.

Conclusion: Deemed Modvat credit was not admissible on the disputed copper scrap, copper wire and aluminium inputs, and the denial of credit was upheld.

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