Modvat/Cenvat credit on scrap inputs cannot be denied for description differences alone when duty-paid receipt and eligibility are unproved to the contrary.

Modvat/Cenvat credit on duty-paid scrap inputs cannot be denied merely because the goods are described differently in commercial and excise documents, unless the department proves that the inputs were not actually received under the duty-paid documents or that the credit was otherwise ineligible. The Tribunal treated differences such as M.S. offcuts, trimmings and CRCA scrap as insufficient by themselves to defeat credit, and noted that dealer segregation, bundling and resale did not justify denial absent evidence of short receipt or excisable manufacture by the dealers. On that basis, the denial of credit failed and the consequential duty, interest and penalty demands were unsustainable.

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Issues: Whether credit of duty on scrap inputs could be denied on the ground that the goods were described differently in commercial and duty documents, and whether the consequential duty, interest and penalties were sustainable.

Analysis: The Tribunal held that Modvat/Cenvat credit is available where duty-paid inputs are received in the factory and used, and that the price paid to dealers has no relevance to credit eligibility. It found no basis to treat the difference between descriptions such as M.S. offcuts, trimmings and CRCA scrap as fatal, since the record did not establish that the goods were not covered by the duty-paid documents or that any short receipt of quantity had occurred. The Tribunal also found that segregation, bundling and sale through first-stage and second-stage dealers did not by themselves justify denial of credit, especially when the dealers' activity was not proceeded against as excisable manufacture and no material showed ineligibility of the credit availed.

Conclusion: The denial of credit was not justified and the duty, interest and penalty orders were unsustainable.

Final Conclusion: The appeals succeeded on merits and the impugned order was set aside in full.

Ratio Decidendi: Modvat or Cenvat credit cannot be denied merely because the input is described differently in commercial and excise documents, unless the department establishes that the duty-paid inputs were not received as covered by the documents or that the credit was otherwise ineligible.

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