Modvat credit on supplementary invoices cannot be denied absent fraud, suppression, or other Rule 7(1)(b) grounds.

Modvat credit could not be denied on supplementary invoices issued by a job worker where the differential duty was voluntarily paid with interest before the show cause notice, and no finding of fraud, collusion, wilful misstatement, or suppression of facts was recorded. Rule 7(1)(b) of the Cenvat Credit Rules, 2002 was therefore not attracted, because the statutory grounds for restricting credit were not established. The reasoning also noted that the transaction was revenue neutral, as the duty paid by the job worker remained available as credit to the recipient.

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Issues: Whether Modvat credit could be denied on the strength of supplementary invoices issued by a job worker where the differential duty had been paid voluntarily, in the absence of any finding of fraud, collusion, wilful misstatement, or suppression of facts under Rule 7(1)(b) of the Cenvat Credit Rules, 2002.

Analysis: The dispute concerned credit taken on supplementary invoices issued after the job worker revised the assessable value and paid the differential duty with interest. No categorical finding was recorded by the lower authorities that the short levy resulted from fraud, collusion, wilful misstatement, or suppression of facts. The record indicated that the differential duty was paid before issuance of the show cause notice and that the Revenue had not established the statutory grounds that would attract the credit restriction. The reasoning also noted that the transaction was revenue neutral, since the duty paid by the job worker was available as credit to the appellant.

Conclusion: Modvat credit could not be denied, as the conditions for disallowance under Rule 7(1)(b) were not satisfied; the issue was decided in favour of the assessee.

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