Modvat credit on inputs survives where duty is shown on invoice and supplier non-payment is not established.

Modvat credit on inputs cannot be disallowed merely because a gate pass entry was altered, where the invoice separately showed excise duty and the credit amount was identifiable. An altered document by itself did not prove that the inputs were cleared without duty payment. Credit could be denied or varied only if a subsequent inquiry at the supplier's end established non-payment of duty. In the absence of any such finding, and without a convincing explanation from the Revenue that duty paid through the credit account would not amount to duty payment on the facts, the disallowance was unsustainable and the credit remained admissible.

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Issues: Whether the credit availed on inputs was liable to be disallowed on the basis of the documents and the absence of a finding that the supplier had not paid duty.

Analysis: The invoice showed excise duty separately and the credit amount was identifiable. The gate pass entry, though altered, did not by itself establish that the inputs were cleared without payment of duty. Credit could be denied or varied only if a subsequent inquiry at the supplier's end established non-payment of duty. In the absence of such a finding, and with no explanation from the Revenue why duty payment through credit account would not amount to duty payment in the facts of the case, the disallowance was unsustainable.

Conclusion: The credit was admissible and the disallowance was set aside in favour of the assessee.

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