Modvat credit on duty-paid inputs re-entering factory cannot be denied for mere invoice lapse where duty-paid character is proved.

Modvat credit could not be denied on duty-paid glass shells re-entering the factory after being stored due to space constraints, because their duty-paid character was established and there was no finding of clandestine removal. The absence of an invoice was only a procedural defect and did not defeat credit. The earlier penalty order also did not record that the goods had been received without payment of duty, so it could not justify denial of credit on re-entry. No substantial question of law arose on the grounds raised, and the credit was upheld.

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Issues: Whether Modvat credit could be allowed on duty-paid glass shells re-entering the factory after being stored outside it, and whether the alleged infirmity in documentation or the earlier penalty order justified denial of credit.

Analysis: The credit originally taken on receipt of the glass shells was not disputed, and the factual finding was that the goods were not cleared to customers but shifted outside the factory due to space constraints. The absence of an invoice was treated as a procedural deficiency that did not destroy the duty-paid character of the inputs. The earlier penalty order did not record a finding that the goods were brought in without payment of duty, and therefore it could not be used to deny Modvat credit on re-entry. No substantial question of law arose from the grounds urged.

Conclusion: Modvat credit was correctly allowed, and the appeal failed.

Ratio Decidendi: Credit cannot be denied on re-entry of goods whose duty-paid character is established merely because of a procedural lapse such as non-generation of an invoice, when the goods were not clandestinely removed without duty.

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