Modvat credit cannot be denied for a supplier's procedural lapse where duty-paid goods and valid documents are undisputed.

Modvat credit could not be denied to the recipient where credit was supported by valid duty-paying documents and the receipt and duty-paid nature of the goods were undisputed. The supplier's failure to file the duplicate transporter copy and triplicate Bill of Entry copy under Rule 57G was a procedural lapse attributable to the supplier, and it could not be used to penalise the recipient in the absence of any show cause notice or adverse finding against the supplier. Denial of credit was therefore unsustainable, and the assessee was entitled to avail the credit.

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Issues: Whether Modvat credit could be denied to the recipient on the ground that the supplier did not comply with the document submission requirements under Rule 57G.

Analysis: The credit was claimed on the basis of valid duty-paying documents and the receipt and duty-paid character of the goods were not disputed. The supplier's alleged failure to submit the duplicate copy for the transporter and the triplicate copy of the Bill of Entry to the Range Officer was only a procedural lapse on the supplier's part. In the absence of any show cause notice or adverse finding against the supplier, that omission could not be used to penalise the recipient who had received the goods in the factory and used them in the course of manufacture.

Conclusion: Denial of Modvat credit was not sustainable and the assessee was entitled to the credit.

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