Modvat credit cannot be denied for technical defects when duty-paid inputs are received and used in manufacture.

Modvat credit could not be denied on purely technical or procedural objections where the inputs were duty paid, received in the factory, and used in manufacture of the final product cleared on payment of duty. The dispute concerned invoices issued by traders, credit taken on endorsed gate passes, and supporting documents said to be from unregistered dealers; however, the revenue did not dispute the duty-paid character, receipt, or consumption of the inputs. Following the insertion of sub-rule (13) in Rule 57G, such formal defects alone were insufficient to defeat credit when the substantive conditions were otherwise satisfied, so the denial was unsustainable.

---

---

Issues: Whether Modvat credit could be denied on technical and procedural objections where the inputs were duty paid, received in the factory, and used in manufacture of the final product cleared on payment of duty.

Analysis: The only dispute was that the invoices were issued by traders not authorised to do so, the credit was taken on endorsed gate passes, and the supporting documents were said to be issued by unregistered dealers. The revenue did not dispute the duty-paid character of the inputs, their receipt in the factory, or their consumption in the manufacture of the final product. After the insertion of sub-rule (13) in Rule 57G, such technical objections could not by themselves justify denial of credit when the substantive factual requirements were otherwise satisfied.

Conclusion: Modvat credit could not be denied merely on those technical and procedural grounds, and the denial was unsustainable.

---