Modvat credit cannot be varied unless duty actually paid on inputs changes; debit notes alone are insufficient.

Modvat credit under Rule 57A depends on the duty actually paid on inputs, and it can be varied under Rule 57E only where there is a corresponding change in that duty. Debit notes reducing the assessable value of the inputs did not alter the duty paid by the input manufacturer, and no refund had been sanctioned to that manufacturer. On those facts, the credit already taken could not be reduced, and the assessee was entitled to retain it.

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Issues: Whether Modvat credit already taken on inputs could be varied merely because debit notes were issued reducing the assessable value of the inputs, in the absence of any change in the duty actually paid by the manufacturer of the inputs.

Analysis: The credit mechanism under Rule 57A attaches to the duty actually paid on inputs, and variation of credit under Rule 57E follows only when there is a corresponding variation in the duty paid by the manufacturer of the inputs. On the facts found, the debit notes did not alter the duty already paid by the input manufacturer, and no refund had been sanctioned to that manufacturer. The Tribunal treated the case as covered by its earlier decision on identical facts.

Conclusion: Modvat credit could not be varied, and the assessee was entitled to retain the credit already taken.

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