Modvat credit cannot be denied for invoice defects alone when duty payment, receipt, and use of inputs are undisputed.

Modvat credit cannot be denied merely because invoices contain defects or the supplier later fails to maintain statutory records, where duty payment, actual receipt of inputs, and their use in manufacture are not in dispute. After the insertion of Rule 57G(11), credit remained available if the documents disclosed the essential particulars of duty payment, description, value, and identity of the factory or warehouse, and the goods had in fact suffered duty and been used. Procedural lapses by the supplier were treated as attributable to the supplier alone and were not a valid basis to refuse credit to the recipient.

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Issues: Whether Modvat credit could be denied on the basis of defects in the invoices and alleged non-compliance by the supplier when duty payment and actual receipt and use of the inputs were not in dispute.

Analysis: The denial of credit was founded only on alleged tampering in the invoices and subsequent enquiry at the supplier's end regarding its statutory records. The show cause notices did not allege that the inputs were not duty paid, that the goods were not received, or that they were not used in the manufacture of final dutiable product. After the amendment to Rule 57G by insertion of sub-rule (11), credit could not be denied merely because the documents lacked particulars, if the essential particulars of duty payment, description, value, and identity of the factory or warehouse were available and the goods had actually suffered duty and been used. The Board's circular also directed that procedural lapses should not lead to denial of credit without proper enquiry. The supplier's failure to maintain records or file documents properly was a procedural lapse attributable to the supplier and could not, by itself, justify denial of credit to the recipient.

Conclusion: Modvat credit was rightly allowed to the assessee and the Revenue's challenge failed.

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