Modvat credit on valid challans upheld, but credit limited to the actual duty paid on inputs.

Modvat credit was available on challans issued by a public sector supplier because those challans were accepted as duty paying documents under the governing instructions, and there was no allegation that they were fake or manipulated. The documents therefore satisfied Rule 57G of the Central Excise Rules, 1944, but the credit could not exceed the actual duty paid on the inputs. As the duty actually payable was lower than the amount shown in the challans, credit was restricted to that lower amount and the excess was disallowed.

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Issues: Whether Modvat credit was admissible on challans issued by a public sector supplier accepted as duty paying documents, and if so whether the credit could be restricted to the actual duty paid rate.

Analysis: The challans issued by the supplier were accepted as duty paying documents under the governing instructions applicable during the material period, and there was no allegation that the documents were fake or manipulated. Since the documents were valid for the purpose of Rule 57G of the Central Excise Rules, 1944, credit was admissible on their strength. However, the actual duty payable on the inputs during the relevant period was only Rs. 920 per MT, so credit could not exceed that amount merely because the challans reflected Rs. 1,000 per MT.

Conclusion: Modvat credit was admissible, but only to the extent of Rs. 920 per MT, and the balance credit was not allowable.

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