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Issues: Whether Modvat credit could be denied solely because the original gate passes were not filed with the RT 12 returns, when the available materials indicated receipt and use of duty-paid inputs and the adjudication was kept pending for an inordinate period.
Analysis: The credit had been taken on the strength of gate passes and the Department did not establish that the inputs were not received, not utilised in manufacture, or not duty paid. The only defect relied upon was non-production of the original gate passes, although the record did not show that the supporting photocopies or RG 23A extracts were absent. The proceedings remained pending for more than six years after issuance of notice, and the assessee asserted destruction of records in a factory fire during that period. In these circumstances, the mere procedural lapse could not be treated as sufficient to deny substantive credit.
Conclusion: Modvat credit could not be denied on the facts found, and the disallowance was unsustainable; the decision was in favour of the assessee.
Ratio Decidendi: A substantive excise credit claim cannot be rejected merely for non-filing of original supporting documents where the Department does not dispute receipt, duty payment, and use of the inputs, and where the procedural lapse is compounded by inordinate adjudicatory delay causing prejudice.
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