Modvat credit allowed on direct manufacturer supply and endorsed invoices; duty default by supplier could not be shifted to buyer.

Modvat credit was allowable where inputs were received directly from the manufacturer and the invoice carried the required endorsement that duty had been paid. Compliance with those two notification conditions satisfied the requirement of taking reasonable steps under the proviso to rule 57-A(6). Because there was no finding that the assessee had participated in any false endorsement, any failure by the input manufacturer to discharge duty could not be shifted onto the assessee. The assessee was therefore entitled to the credit, and the departmental challenge failed.

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Issues: Whether the assessee was entitled to Modvat credit where the inputs were received directly from the manufacturers and the invoices contained the requisite endorsement that duty had been paid, even though the department alleged that the supplier had not actually discharged the duty liability.

Analysis: The Notification governing the credit required only two conditions for availing Modvat credit: direct receipt of inputs from the manufacturer and an invoice containing the necessary endorsement of duty payment. Those conditions were fulfilled. The proviso to rule 57-A(6) requiring reasonable steps was satisfied by compliance with the conditions specified in the Notification. There was no finding that the assessee had participated in any incorrect endorsement, and any failure to pay duty lay with the input manufacturer. In such circumstances, the liability could not be shifted to the assessee.

Conclusion: The assessee was entitled to the credit, and the departmental appeals were without merit.

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