Modvat credit cannot be denied without contrary evidence where statutory records show receipt, job work dispatch and processing.

Modvat credit could not be denied on a mere allegation of short receipt where the assessee showed through job work challans, RG 23 Part II debit entries and Form V records that duty-paid inputs were received, sent for processing and duly accounted for in statutory records. Those records were treated as reliable statutory evidence, and the revenue produced no verification from the job worker's premises or other contrary material to disprove receipt. On that record, non-receipt of inputs was not established, so the denial of credit and the consequential penalty were unsustainable.

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Issues: Whether Modvat credit was rightly denied on the ground that the inputs were short received in the factory despite the assessee's claim that the full quantity had been received, sent for job work, and accounted for in statutory records.

Analysis: The inputs were duty-paid goods falling under Chapter 73 of the Central Excise Tariff Act, 1985, and the assessee maintained job work challans, RG 23 Part II debit entries, and Form V records showing dispatch of the goods to the job worker and receipt of processed goods thereafter. These records were treated as statutory records, not private documents, and the revenue did not conduct any verification at the job worker's premises or produce contrary evidence to establish short receipt. In these circumstances, the allegation of ineligible credit on the basis of non-receipt of inputs was not made out.

Conclusion: The allegation of short receipt of inputs failed, and the denial of Modvat credit and penalty was unsustainable.

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