Modvat credit cannot be denied where statutory records show receipt and use of duty-paid inputs despite a missing gate register entry.

Modvat credit could not be denied merely because the gate register did not contain the relevant entry when the statutory records showed receipt and use of the inputs in manufacture. RG-23 Part-I and RG-23 Part-II reflected receipt of the disputed quantities in the factory and their issue for production of final products cleared on payment of duty. The inputs were received under duty-paid documents from the appellant's trading unit, and there was no evidence of procurement from any other source. On these facts, the denial of credit was unsustainable and the appellant was entitled to the credit claimed.

---

---

Issues: Whether Modvat credit could be denied on the ground that the inputs were not received in the factory despite statutory records showing receipt and use of the inputs in manufacture.

Analysis: The appellant's records under RG-23 Part-I and RG-23 Part-II showed receipt of the disputed quantities in the factory and subsequent issue for manufacture of final products cleared on payment of duty. The inputs had been received from the appellant's trading unit under duty-paid documents, and there was no evidence that the same quantities were obtained from any other source. In these circumstances, the denial of credit could not be sustained merely on the basis that the gate register did not contain the relevant entry.

Conclusion: The denial of credit was unsustainable and the appellant was entitled to the credit claimed.

---