Modvat credit cannot be denied solely because registered dealers allegedly sourced inputs from non-existent units.

Modvat credit taken on invoices issued by registered dealers could not be denied merely because the dealers were said to have sourced inputs from non-existent units. The invoices contained the required RG-23D particulars and the manufacturer's duty payment details, the consignments had crossed octroi barriers, octroi was paid, payments were made by cheque, and the manufacturer's records showed preventive checks and assessed RT-12 returns. As the Revenue did not rebut these documentary findings and relied only on the alleged source of procurement, the credit claim was upheld and the Revenue's challenge failed.

---

---

Issues: Whether Modvat credit taken on the strength of invoices issued by registered dealers could be denied merely because the dealers were stated to have procured inputs from non-existent units.

Analysis: The invoices relied upon by the assessee contained the relevant RG-23D particulars and particulars of the manufacturer showing payment of duty. The consignments had crossed the octroi barriers, octroi had been paid, payments were made by cheque, and the record of the manufacturer showed that preventive checks had been conducted and RT-12 returns were assessed. The Revenue did not rebut these documentary findings, and its objection was confined to the alleged source of the dealers' procurement.

Conclusion: Modvat credit could not be denied on that basis, and the Revenue's appeal failed.

---