MODVAT credit denied where inputs were never received in the factory and invoices were issued only to enable credit

MODVAT credit was denied because the inputs covered by the invoices were not actually received in the factory. The assessee's General Manager admitted non-receipt of the goods, and the supplier also stated that the goods were not supplied and the invoices were issued only to facilitate credit; neither statement was retracted. Credit under Rule 57A read with Rule 57G of the Central Excise Rules, 1944 was available only where inputs were actually received under a valid document and used in or in relation to manufacture. On those facts, the credit claim failed and the appeal was rejected.

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Issues: Admissibility of MODVAT credit where the inputs covered by invoices were not received in the factory.

Analysis: The statement of the assessee's General Manager recorded non-receipt of the inputs, and the supplier's statement also admitted that the goods were not supplied and invoices were issued only to enable availment of credit. As neither statement was retracted, the credit claim failed on the facts. MODVAT credit under Rule 57A of the Central Excise Rules, 1944 read with Rule 57G of the said Rules could be taken only when the inputs were actually received in the factory under cover of a valid document and used in or in relation to manufacture.

Conclusion: The MODVAT credit was not admissible and the appeal failed.

Ratio Decidendi: MODVAT credit cannot be allowed unless the inputs are actually received in the factory under a valid document and are used in or in relation to the manufacture of the final product.

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