Rule 57E credit for enhanced input duty upheld where voluntary supplier payment and debit note established duty burden transfer.

Credit of enhanced duty paid on inputs was held admissible under Rule 57E where the supplier's later payment was voluntary and the extended period under the proviso to Section 11A was not attracted. The analysis accepted that the short levy was not based on suppression or similar grounds and that the duty had been paid only after departmental persuasion, so the proviso could not bar credit. The objection that the duty incidence had not been passed on was also rejected because a debit note showed transfer of the burden to the appellant. The denial of credit was therefore unsustainable and was set aside.

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Issues: Whether credit of enhanced duty paid on inputs was admissible under Rule 57E when the supplier paid the duty voluntarily and the duty burden had been passed on to the appellant.

Analysis: The denial of credit was based on the view that enhanced duty paid later could not be taken as credit where the original short payment fell within the proviso to Section 11A. The Assistant Commissioner's order showed, however, that the supplier's payment was voluntary and that the extended period under the proviso to Section 11A was not available, as there was no basis for invoking suppression or similar grounds. The order further noted that the duty had been paid for the entire period only after departmental persuasion, so the short levy was not attributable to the factors contemplated by the proviso. The objection that the duty incidence had not been passed on was also rejected because the appellant had produced a debit note evidencing transfer of the duty burden.

Conclusion: Credit under Rule 57E was admissible. The impugned order denying credit was unsustainable and was set aside.

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