Procedural irregularities do not bar Modvat credit when duty-paid inputs are accounted for and no revenue loss is shown.

Procedural lapses in invoice endorsement or internal movement of duty-paid inputs within the factory did not, by themselves, justify denial of Modvat credit or imposition of penalty. The goods remained duty paid and were properly accounted for, and the record showed no revenue loss. The alleged defect was treated as an accounting irregularity rather than a substantive breach affecting credit entitlement. On that basis, denial of credit was not sustainable and the adverse penalty view could not be supported.

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Issues: Whether Modvat credit could be denied and penalty imposed merely because duty-paid inputs were moved and accounted for within the factory without physical removal and without endorsement of the invoice by the intermediary.

Analysis: The goods admittedly did not leave the factory premises, but movement within the factory could still amount to removal for excise purposes. After payment of duty on the clearances, there was no rule barring the duty-paid goods from being handed back for further use without physical clearance from the factory. The absence of endorsement on the invoice and other procedural irregularities did not, by themselves, disentitle credit where the goods were duty paid and accounted for. No revenue loss was shown, and the alleged defect was at most a matter of accounting compliance. The basis for penalty was also not made out on these facts.

Conclusion: Denial of credit was not sustainable and the penalty could not be upheld.

Final Conclusion: The appellant was entitled to the credit claimed and the adverse order was set aside.

Ratio Decidendi: Procedural lapses in accounting or invoice endorsement do not justify denial of excise credit or penalty when the goods are duty paid, properly accounted for, and no revenue loss is shown.

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