Modvat credit claims require the assessee to prove receipt and use of inputs; burden cannot be shifted to Revenue.

An assessee claiming Modvat credit must prove, with credible evidence, receipt and actual use of the imported inputs in the manufacture of finished products. A supplementary balance sheet cannot, by itself, justify the credit unless the assessee first explains discrepancies in its accounts and establishes the factual foundation for the claim. The Tribunal erred in accepting the supplementary balance sheet without reasoned scrutiny and in shifting the burden to the Revenue to disprove receipt or non-utilisation, because the Revenue is not required to prove a negative where entitlement to credit is asserted. The credit claim was therefore not sustained on the material relied upon.

---

---

Issues: Whether the Tribunal was justified in allowing Modvat credit on the basis of a supplementary balance sheet and in placing the burden on the Revenue to disprove receipt and use of the imported inputs.

Analysis: The balance sheet maintained by the assessee did not disclose receipt of the imported material, and the later supplementary balance sheet was relied upon to support the claim of utilisation in manufacture. The Court held that once the assessee relies on such material to justify the credit, it must explain the discrepancy in its accounts and produce acceptable evidence showing receipt and actual use of the inputs in the manufacture of the finished products. The Tribunal erred in accepting the supplementary balance sheet without reasoned scrutiny and in shifting the burden onto the Revenue to prove non-utilisation. The Court further held that the Revenue was not required to prove a negative where the assessee asserted entitlement to the credit.

Conclusion: The Tribunal's order allowing the appeal was erroneous, and the question was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Where an assessee claims Modvat credit on the basis of receipt and use of inputs, the burden lies on the assessee to prove the factual foundation for the credit with credible evidence, and the Tribunal cannot accept a supplementary balance sheet without adequate reasons while shifting that burden to the Revenue.

---