Modvat credit and Board circular compliance require verification of invoice genuineness before denying input credit.

Modvat credit could not be denied merely because the invoice was issued by a consignment agent where the Board circular recognised such agents as authorised to issue modvatable invoices for the relevant period. The circular also required verification of the genuineness of the invoices and the duty-paid character of the inputs by the Assistant Commissioner. Because the lower authorities denied credit without applying the circular and without the prescribed verification, the denial was not sustainable. The dispute was therefore remitted for fresh decision in accordance with the circular, after verification and hearing.

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Issues: Whether Modvat credit could be denied on the ground that the invoice was issued by a consignment agent, and whether the adjudicating authority was bound to verify the genuineness of the invoice and the duty-paid nature of the inputs in terms of the Board circular.

Analysis: The Board circular recognised consignment agents registered with the Department under the relevant excise provisions and the notification as persons authorised to issue modvatable invoices for the specified period. It also directed the Assistant Commissioner to verify the genuineness of the invoices and the duty-paid character of the inputs covered by them. The invoice in question fell within that period, but the lower authorities denied credit without giving effect to the circular and without the prescribed verification. Such circulars are binding on departmental authorities.

Conclusion: The denial of Modvat credit could not be sustained on the reasoning adopted by the lower authorities, and the matter had to be readjudicated in accordance with the Board circular.

Final Conclusion: The assessee succeeded in appeal, and the dispute was sent back for fresh decision after verification and hearing.

Ratio Decidendi: Departmental authorities are bound by binding Board circulars, and where a circular requires verification of invoice genuineness and duty-paid character, credit cannot be denied without such adjudication.

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