Modvat credit on job-work inputs remained available where later duty payment, valid certification, and revenue neutrality were established.

Modvat credit was treated as admissible where inputs were sent for job work under Rule 57F(2), later not returned in the originally intended manner, and duty on those inputs was paid subsequently. The credit claim was supported by a certificate from the competent authority, and the earlier certificate issued by an Inspector was cured by a later Superintendent's certificate. Objections based on grounds not set out in the show cause notice were rejected because the assessee had not been put on notice. The absence of a declaration did not defeat credit on these facts, particularly where the arrangement was revenue neutral and no revenue loss was shown.

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Issues: Whether Modvat credit was admissible when inputs sent for job work under Rule 57F(2) of the Central Excise Rules, 1944 were not returned, duty on the inputs was paid subsequently, and the assessee produced a valid certificate issued by the competent authority.

Analysis: The certificate originally produced was issued by the Inspector, who was not the competent authority, but the assessee later obtained a certificate from the Superintendent. The authority below also relied on grounds that were not contained in the show cause notice, which could not be done without putting the assessee on notice. On the substantive issue, the inputs had been received and used under the Modvat scheme, and the duty attributable to those inputs was paid later when the job-work procedure was not completed as initially intended. In such circumstances, the later payment of duty on the inputs supported the credit claim, and the situation was treated as revenue neutral. The non-filing of declaration was also not a bar on these facts.

Conclusion: Modvat credit was admissible and the Revenue's objection to the credit was not sustainable.

Ratio Decidendi: Where duty on inputs is paid subsequently and the credit is otherwise supported by a valid certificate from the competent authority, Modvat credit cannot be denied merely because the original procedural posture under the job-work rule changed or because the assessee did not file a declaration, especially when no revenue loss is shown.

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