Modvat credit cannot be denied for technical invoice defects where duty-paid inputs were fully accounted and used in manufacture.

Modvat credit could not be denied merely because invoices failed to satisfy prescribed procedural requirements where the inputs were duty paid, received and accounted for in statutory records, and used in manufacture. The invoice defects were treated as technical and rectifiable, and substantial compliance with the Modvat scheme was sufficient to preserve the substantive benefit. Denial of credit was therefore not justified, and the penalty was unwarranted.

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Issues: Whether Modvat credit could be denied and penalty sustained on the ground that the invoices did not conform to the prescribed procedural requirements.

Analysis: The inputs, their duty-paid nature, their receipt and accountal in the statutory records, and their use in the manufacture of finished goods were not in dispute. The defects in the invoices were treated as technical and rectifiable in nature. In the context of the Modvat scheme, the substantive benefit was held not to be deniable for mere procedural infractions where there was substantial compliance with the relevant rules.

Conclusion: The denial of Modvat credit was not justified and the penalty was unwarranted.

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