Modvat credit on escalation invoices cannot be denied where original credit was already allowed for the same capital goods.

Modvat credit on escalation invoices for capital goods could not be denied where the same goods had already been received under original invoices and credit had been allowed on that receipt. The later invoices reflected only a price escalation for the same capital goods and did not change their character or affect the admissibility of credit already recognised. On that basis, denial of credit on the escalation invoices was not justified, and the disallowance was set aside.

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Issues: Whether Modvat credit could be denied on escalation invoices raised later, when credit had already been allowed on the original invoices for the same capital goods received earlier.

Analysis: The goods covered by the escalation invoices had admittedly been received in 1995 under the original invoices and were treated as capital goods. Credit had already been allowed on those original invoices. The subsequent invoices were only for escalation of price in respect of the same goods, and the later invoicing did not alter the character of the goods or the admissibility of credit already recognized on their receipt. In these circumstances, denial of credit on the escalation invoices was not justified.

Conclusion: The disallowance of Modvat credit on the escalation invoices was set aside and the appeal was allowed.

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