Modvat credit requires reliable proof of actual input movement; adverse inference followed non-production of best evidence and irregular invoice correction.

Modvat credit was denied because the assessee failed to prove by reliable evidence that duty-paid inputs were actually transferred from Nashik to the manufacturing unit at Thane. The Court treated the withheld octroi receipts as the best available evidence of inter-city movement of goods and drew an adverse inference from their non-production despite opportunity. It also noted that invoice particulars had been corrected outside the prescribed procedure, which reinforced the conclusion that the credit claim was not established in accordance with law. The denial of credit was upheld.

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Issues: Whether Modvat credit could be denied where the assessee failed to prove by reliable evidence that the inputs were actually transferred from the declared unit to the manufacturing unit, and whether correction of invoice particulars in breach of the prescribed procedure justified disallowance of credit.

Analysis: The assessee claimed credit on duty-paid inputs said to have been received and used at Thane, though the invoices had originally been issued with the Nashik address and were later altered without compliance with the prescribed manner of correction. The Court found that octroi receipts, which were the best available evidence of inter-city movement of goods, were not produced despite opportunity. In the absence of such proof, an adverse inference had to be drawn that the goods did not travel from Nashik to Thane. The concurrent findings of the authorities below were supported by the record and the invoice correction irregularity reinforced the conclusion that the Modvat claim was not established in accordance with law.

Conclusion: The denial of Modvat credit was upheld and the questions of law were answered in favour of the Revenue.

Ratio Decidendi: Where the assessee fails to produce the best evidence proving actual receipt and movement of inputs, the Court may draw an adverse inference and sustain denial of Modvat credit, especially when the invoice corrections were not made in the manner required by the rules.

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