Modvat credit cannot be denied for wrong vehicle numbers alone when input receipt and use are supported by records

Modvat credit could not be denied solely because dealer invoices showed incorrect vehicle numbers, where statutory RG 23 records showed receipt and consumption of inputs and the final products were cleared on payment of duty. The Revenue produced no concrete evidence of diversion, alternative procurement, or clandestine removal, and a finding of non-receipt based only on assumptions and probabilities was insufficient. On that basis, the denial of credit was not justified and the penalties could not be sustained.

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Issues: Whether Modvat credit could be denied and penalties sustained merely because some dealer invoices contained wrong vehicle numbers and the Department alleged non-receipt of inputs.

Analysis: The only substantive basis for denial was the incorrect vehicle numbers in the dealers' invoices. That circumstance, by itself, was insufficient to establish that the inputs were never received, especially where the goods were recorded in the statutory RG 23 records, shown as consumed in manufacture, and the final products were cleared on payment of duty. The Department adduced no concrete evidence of diversion, alternative procurement, or clandestine removal, and the finding of non-receipt rested largely on assumptions and probabilities rather than tangible proof. The explanation that the dealers raised fresh invoices to secure sales tax benefit, while the goods moved in the same vehicles, was not rebutted by any effective contrary evidence.

Conclusion: The denial of Modvat credit was not justified and the penalties could not be sustained.

Ratio Decidendi: Modvat or Cenvat credit cannot be denied merely on the ground of incorrect vehicle numbers in invoices when receipt and use of inputs are supported by statutory records and the Revenue fails to produce corroborative evidence of non-receipt or diversion.

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