Modvat higher notional credit remains available despite later payment of differential duty by the input manufacturer.

Under the Modvat scheme, differential notional higher credit was available to the input user where the governing rule permitted higher notional credit and the input manufacturer later paid differential central excise duty. Rule 57B, read with Notification No. 175/86-C.E., was treated as authorising the credit, and the later duty payment did not by itself bar the corresponding benefit. Rule 57E was considered inapplicable on the facts, and the objection based on that provision was rejected.

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Issues: Whether differential notional higher credit could be taken by the input user after payment of differential central excise duty by the input manufacturer under the relevant Modvat provisions.

Analysis: Rule 57B, read with Notification No. 175/86-C.E., was treated as conferring authority to take higher notional credit. The later payment of differential duty by the input manufacturer did not bar the credit, and there was no prohibition against availing such differential notional credit when the duty increase came to light and was paid. Rule 57E was held to have no application to the facts, and reliance on Rule 57F(3) and the cited precedent was found irrelevant to the controversy.

Conclusion: The differential notional higher credit was allowable and the Revenue's objection based on Rule 57E was rejected.

Final Conclusion: The assessee was held entitled to the differential notional higher credit, and the Revenue's appeal failed.

Ratio Decidendi: Where the governing Modvat rule permits higher notional credit, subsequent payment of differential duty by the input manufacturer does not by itself disentitle the input user from claiming the corresponding credit, and an inapplicable procedural provision cannot be used to deny that benefit.

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