Modvat credit cannot be denied on a procedural invoice objection without a mandatory show cause notice under excise law.

Denial of Modvat credit on a procedural objection concerning invoice colour under Rule 57GG of the Central Excise Rules, 1944 could not be sustained without issuance of a mandatory show cause notice under Section 11A of the Central Excise Act, 1944. The claim was also treated as within limitation, because the credit was reversed on 18-1-1996 and the refund claim was filed on 15-7-1996, and the authorities recorded that it was in time. A procedural lapse, by itself, was insufficient to deny the credit or the consequential refund.

---

---

Issues: Whether denial of Modvat credit and consequential refund was sustainable in the absence of a show cause notice, and whether the refund claim was barred by limitation.

Analysis: The credit had been reversed on 18-1-1996 and the refund claim was filed on 15-7-1996, which was within six months. The authorities had also recorded that the claim was in time. On merits, the denial of credit was based on a procedural objection regarding the colour of the invoices under Rule 57GG of the Central Excise Rules, 1944. The Tribunal held that such denial could not be sustained without issuance of a show cause notice, and accepted the view that notice was mandatory under Section 11A of the Central Excise Act, 1944. The procedural lapse, if any, was not sufficient to deny the credit.

Conclusion: Denial of Modvat credit and refund was unsustainable, and the issue of show cause notice was mandatory; the appeal was allowed in favour of the assessee.

Ratio Decidendi: A benefit or demand under the Central Excise law cannot be denied on a procedural objection without a mandatory show cause notice under Section 11A of the Central Excise Act, 1944, especially where the claim is otherwise within limitation.

---