Modvat credit cannot be denied to a bona fide purchaser for a supplier's procedural lapse in handling goods.

Modvat credit cannot be denied to a bona fide purchaser merely because the registered dealer allegedly lacked facilities to load, unload, store, or supply heavy coils from the registered premises. The assessee received duty-paid goods under invoices issued by a registered dealer, paid for them, and used them in manufacture; any violation by the dealer did not by itself justify denial of credit to the buyer. The setting aside of the dealer's penalty under Rule 173Q(1)(bbb) further supported the assessee's entitlement, and the disallowance of credit was set aside.

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Issues: Whether Modvat credit could be denied to the assessee merely because the supplier allegedly had no arrangement for loading and unloading heavy coils at the registered premises and stored or supplied the goods from another premises.

Analysis: The assessee received the goods under duty paid invoices issued by a registered dealer. There was no dispute that the goods were duly paid for and were utilised in the manufacture of the final product. Any violation of the rules by the dealer could not, by itself, justify denial of credit to a bona fide purchaser. The setting aside of the dealer's penalty under Rule 173Q(1)(bbb) of the Central Excise Rules further supported the assessee's case.

Conclusion: Modvat credit could not be denied on the alleged lapse of the supplier, and the disallowance was set aside in favour of the assessee.

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