Deemed Modvat credit denied for exempt iron and steel inputs lacking duty-paying documents under the prescribed rule.

Deemed Modvat credit was unavailable where iron and steel inputs were purchased from the open market but were covered by an exemption notification and lacked prescribed duty-paying documents. Rule 57G(2) required receipt of inputs under documents evidencing payment of duty, and the deemed credit order itself excluded inputs recognisable as non-duty paid or charged to nil rate of duty. Since the goods fell under Notification No. 208/83-C.E., their exempt character remained unchanged by market purchase, and the larger Bench ruling on the same notification supported the exception. Deemed credit was therefore not admissible, and the Revenue succeeded.

---

---

Issues: Whether deemed Modvat credit was admissible on iron and steel inputs purchased from the open market when those inputs were covered by an exemption notification and were not supported by duty-paying documents.

Analysis: Rule 57G(2) permitted credit only when the inputs were received under prescribed duty-paying documents evidencing payment of duty. The Ministry's order granting deemed credit was subject to stated exceptions, including cases where the inputs were clearly recognisable as non-duty paid or charged to nil rate of duty. The inputs in question were covered by Notification No. 208/83-C.E. and thus enjoyed duty exemption. Their purchase from the open market did not alter their character, and the larger Bench ruling on the same notification had already held that such inputs attracted the exception to deemed credit.

Conclusion: Deemed Modvat credit was not admissible, and the Revenue's appeal succeeded.

---