Modvat credit requires receipt by the consignee shown in the duty document; altered gate pass could not justify credit.

Modvat credit was held inadmissible because the goods were actually received by a job worker and the original gate pass had been altered to show the appellant as consignee; the credit entitlement depended on receipt of both the goods and the duty-paying document by the consignee shown in the gate pass, so the disallowance was upheld. Penalty under Rule 173Q(1) was not sustained because the record did not establish fraudulent intention sufficient to justify penal action, and the penalty was set aside. The result was that the appellant remained liable only for the disallowed credit amount.

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Issues: (i) whether Modvat credit was admissible when the goods were received by a job worker and the consignee's name in the original gate pass had been altered; (ii) whether penalty was sustainable under Rule 173Q(1) of the Central Excise Rules, 1944.

Issue (i): Whether Modvat credit was admissible when the goods were received by a job worker and the consignee's name in the original gate pass had been altered.

Analysis: The goods were in fact consigned to and received by the job worker, not by the appellant. The duplicate gate pass carried the true consignee, while the original gate pass had the consignee's name scored out and replaced with the appellant's name. The right to Modvat credit depended on receipt of the material and the duty-paying document by the consignee shown in the gate pass. The alteration in the original document was treated as an impermissible device to secure credit for goods not received by the appellant.

Conclusion: Modvat credit was not admissible, and the disallowance was upheld.

Issue (ii): Whether penalty was sustainable under Rule 173Q(1) of the Central Excise Rules, 1944.

Analysis: Although the credit was wrongly taken, the record did not justify a finding of fraudulent intention sufficient to attract penalty. The irregularity arose from a procedural device adopted in the gate pass, but the circumstances did not warrant penal consequence.

Conclusion: The penalty was not sustainable and was set aside.

Final Conclusion: The denial of Modvat credit was sustained, but the penal component was deleted, leaving the appellant liable only for the credit amount.

Ratio Decidendi: Modvat credit is available only when the goods and the corresponding duty-paying document are received by the consignee, and an alteration in the consignee's name to claim credit for goods received by another person is impermissible.

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