Modvat credit on assessable design and development charges required verification of duty payment before denial.

Design and development charges forming part of the assessable value of excisable goods were treated as duty-paid value under Section 4 of the Central Excise Act, so Modvat credit could not be denied merely because the charges were not separately linked to specified inputs. The authority had to verify the supplier's duty payment particulars with the jurisdictional officer before rejecting credit. The denial of Modvat credit was therefore set aside, and the matter was remanded for verification at the supplier's end before credit could be extended.

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Issues: Whether Modvat credit could be denied on the ground that the duty shown on design and development charges was not relatable to specified inputs, and whether the genuineness of the duty payment required verification from the supplier's jurisdictional officer.

Analysis: Design and development charges were treated as part of the assessable value of the excisable goods under Section 4 of the Central Excise Act, and duty paid on such charges was therefore duty paid on the cleared goods. The denial of credit could not rest only on doubt about the allocation or break-up of those charges without first verifying the duty payment particulars from the officer having jurisdiction over the supplier's factory.

Conclusion: The denial of Modvat credit was set aside, and the matter was remanded for verification of duty payment at the supplier's end before extending credit.

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