Modvat credit cannot be denied for money credit debit when duty payment is reflected in the supplier's documents.

Modvat credit was admissible where the supplier's documents showed duty payment, and the scheme did not distinguish between debits made through PLA, RG 23A or RG 23B Part II. The department could not deny credit to the recipient merely because the supplier used a money credit debit; if the document was considered incorrect, the proper course was to seek rectification under the prescribed rule. Denial of credit on that ground was unsustainable.

---

---

Issues: Whether Modvat credit could be denied merely because the supplier cleared the inputs by debiting duty in RG 23B Part II money credit account instead of PLA, and whether the recipient was required to suffer denial of credit without first invoking the rectification mechanism under the rules.

Analysis: The input supplier had cleared the goods under a gate pass and the documents reflected duty debit. The applicable Modvat framework allowed credit on specified duties for use in manufacture of final products, and the scheme did not create a distinction between duty debits made through PLA, RG 23A, or RG 23B Part II when the document itself showed duty payment. If the department considered the supplier's document incorrect, the proper course was to seek rectification under the prescribed rule rather than deny credit at the recipient's end on a mere interpretative objection. The notification governing admissible duties also did not support exclusion of credit on the ground that the debit was made from money credit.

Conclusion: Modvat credit was admissible and the denial of credit on the basis of the money credit debit was unsustainable, in favour of the assessee.

---