Modvat credit cannot be denied on valid dealer invoices absent cancellation of registration or proceedings against the dealer.

Modvat credit could not be denied where the invoices were issued during the relevant period by a dealer holding a valid registration, and there was no record of cancellation of that registration or initiation of proceedings against the dealer. Allegations about the dealer's storage capacity did not invalidate the invoices in the absence of action against the registration itself. Denial of credit was therefore unjustified, and the assessee was entitled to the claimed Modvat credit.

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Issues: Whether Modvat credit could be denied on the basis that the invoices were issued by a registered dealer whose registration had not been cancelled and against whom no proceedings had been initiated.

Analysis: The invoices were issued during the relevant period by a dealer who held a valid registration. There was nothing on record to show cancellation of the registration certificate or initiation of any proceedings against the dealer. In these circumstances, the invoices could not be treated as invalid documents merely because the dealer was alleged to have insufficient storage capacity.

Conclusion: Denial of Modvat credit was unjustified, and the assessee was entitled to the credit claimed.

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