Modvat credit cannot be denied for procedural document defects without verifying duty payment, receipt, and use of inputs.

Amended Modvat provisions and the Board circular required the department to verify the duty-paid character of the goods, receipt of inputs, and their use in manufacturing before denying credit on procedural defects in duty-paying documents. The circular also discouraged issuance of show cause notices for mere procedural lapses without such verification and called for pending matters to be disposed of accordingly. On that basis, denial of credit for the stated procedural deficiencies was not finally sustained, and the matter was remanded for fresh adjudication under the amended regime after hearing the appellant.

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Issues: Whether Modvat credit could be denied merely on procedural defects in the duty-paying documents in view of the amended Rules 57G and 57T of the Central Excise Rules and the Board circular governing such cases.

Analysis: The amended provisions and the Board circular required the departmental authority to make proper enquiries regarding the duty-paid nature of the goods, receipt of the inputs, and their use in the manufacture of excisable goods before denying credit on procedural grounds. The circular also directed that show cause notices should not be issued for procedural lapses without such verification and that pending cases be disposed of accordingly. Since the disputed denial of credit rested on such procedural deficiencies, the matter required fresh consideration under the amended regime.

Conclusion: The denial of credit on the stated procedural grounds was not finally sustained and the matter was remanded to the adjudicating authority for fresh decision after considering the amended rules and after hearing the appellant.

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