Modvat credit on returned duty-paid goods cannot be denied merely because the later invoice shows nil duty.

Modvat credit remained admissible on duty-paid returned goods received under the prescribed return procedure, reprocessed by the factory, and cleared on invoices cross-referencing the original duty-paid documents. The later clearance invoice showing nil duty did not, by itself, justify denial of credit where the record also showed the relevant declarations and departmental certification evidencing compliance with Rule 173H and the applicable Modvat procedure. Credit could not be denied merely on the form of the subsequent invoice when the substantive duty-paid character of the returned goods and procedural compliance were established.

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Issues: Whether Modvat credit was admissible to the appellant's Chinchwad unit on duty-paid returned goods cleared by the Ratnagiri unit under Rule 173H with invoices showing nil duty but cross-referencing the original duty-paid documents.

Analysis: The returned goods had originally suffered duty, were received back under the prescribed return procedure, and were reprocessed/reconditioned by the Ratnagiri unit without availing credit on the returned inputs. The invoices issued on clearance to the Chinchwad unit referred to the original duty-paid invoices and the record included the relevant declarations and departmental certification supporting compliance with the prescribed procedure. In these circumstances, the denial of credit on the ground that the later invoices showed nil duty was not justified, and the impugned order was found to be contrary to the record.

Conclusion: The Modvat credit was admissible, and the assessee succeeded on the issue.

Final Conclusion: The appeal was allowed because the credit taken on duty-paid returned goods was held to be in accordance with the applicable return and Modvat procedure.

Ratio Decidendi: Where duty-paid goods are returned under the prescribed procedure, reprocessed, and cleared with invoices cross-referencing the original duty-paid documents, Modvat credit cannot be denied merely because the later clearance invoice shows nil duty.

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