Modvat credit cannot be denied to the buyer solely because the supplier issued double invoices and later paid duty.

Modvat credit could not be denied to the recipient merely because the input manufacturer had issued double invoices and had initially not paid duty, where the invoices bore duty payment particulars and the duty was subsequently paid. Credit taken on the basis of Central Excise invoices showing such particulars was treated as valid, and the department was directed to proceed against the supplier who issued the questionable invoices rather than deny credit to the purchaser. On that basis, the denial of Modvat credit was held unsustainable and consequential relief followed.

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Issues: Whether Modvat credit could be denied to the appellant merely because the input manufacturer had issued double invoices and had initially not paid duty, when the invoices contained duty payment particulars and the duty was subsequently paid.

Analysis: The credit was taken on the basis of Central Excise invoices issued by the input manufacturer and the invoices carried duty payment particulars. Proceedings had been initiated against the input manufacturer and the duty was later paid by them. In such circumstances, denial of credit to the appellant was held to be unjustified. Reliance was placed on the principle that where credit is availed on invoices showing duty particulars, the credit cannot be denied to the recipient purchaser; the department's remedy lies in proceeding against the party issuing bogus invoices and confirming duty against that party.

Conclusion: The denial of Modvat credit was unsustainable and the appeal was allowed with consequential relief.

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