Supplementary invoices and Modvat credit remain valid where differential duty was paid voluntarily and no suppression or mala fide intent was found.

Supplementary invoices are not invalid for credit purposes merely because the supplier had undervalued goods, where the differential duty was paid voluntarily and no fraud, collusion, wilful misstatement, suppression of facts, or mala fide intention was found. In those circumstances, Rule 7(1)(b) does not bar Modvat credit, because the further duty cannot be treated as recoverable by reason of culpable conduct. The denial of credit was therefore unsustainable, and the assessee was entitled to the credit claimed with consequential relief.

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Issues: Whether Modvat credit could be denied on the basis that supplementary invoices issued by the supplier were invalid because the supplier had undervalued the goods and allegedly acted with suppression and mala fide intention, attracting Rule 7(1)(b) of the Cenvat Credit Rules.

Analysis: The denial of credit depended on whether the supplementary invoices represented a case of fraud, collusion, wilful misstatement, or suppression of facts by the supplier. The Tribunal noted that in the supplier's own appeal the differential duty had been paid voluntarily and the penalty had been set aside, indicating absence of mala fide intention. On that basis, the further duty paid could not be treated as recoverable by reason of any culpable conduct so as to invalidate the supplementary invoices for credit purposes.

Conclusion: The supplementary invoices were not hit by the bar under Rule 7(1)(b), and the denial of Modvat credit was unsustainable.

Final Conclusion: The impugned order was set aside and the assessee was held entitled to the credit claimed with consequential relief.

Ratio Decidendi: Where the supplier's differential duty is paid voluntarily and no mala fide intention or suppression of facts is found, supplementary invoices are not invalid for the purpose of availing credit under Rule 7(1)(b).

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