Modvat credit requires proper duty paying documents; altered invoices were invalid, while penalty was waived on the facts.

Modvat credit was denied where the assessee relied on invoices that had been altered by scoring out the printed description "Quadruplicate for Assessee" and replacing it with handwritten words, because such documents were treated as irregular and not as proper duty paying documents for credit purposes. The accompanying penalty was found unsustainable on the facts, and was set aside. The note therefore states that credit under the then applicable Modvat regime depended on specified valid documents, while penal consequences could still be waived where the circumstances did not justify enhanced punishment.

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Issues: (i) Whether Modvat credit was admissible on the strength of an invoice where the words "Quadruplicate for Assessee" had been erased and "Duplicate for transporter" written by hand; (ii) whether the penalty imposed was sustainable.

Issue (i): Whether Modvat credit was admissible on the strength of an invoice where the words "Quadruplicate for Assessee" had been erased and "Duplicate for transporter" written by hand.

Analysis: The invoices relied upon for availing credit were admittedly quadruplicate copies. The alteration made by scoring out the printed description and substituting handwritten words rendered the documents irregular. Since Modvat credit at the relevant time was available only on specified duty paying documents, the altered invoices could not be treated as proper duty paying documents.

Conclusion: Modvat credit was not admissible to the assessee on the basis of such altered invoices.

Issue (ii): Whether the penalty imposed was sustainable.

Analysis: In view of the surrounding facts, the lapse was not considered fit for penal consequence, and the enhanced penalty was not warranted.

Conclusion: The penalty was set aside in favour of the assessee.

Final Conclusion: The credit denial was sustained, but the penalty was annulled, resulting in only partial relief to the assessee.

Ratio Decidendi: Modvat credit is allowable only on proper specified duty paying documents, and an altered invoice with handwritten substitution does not qualify as a valid basis for credit; penalty may nevertheless be waived on the facts of the case.

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