Modvat credit cannot be denied merely because invoices are in a loan-licensee's name if manufacture by that licensee is unrebutted.

Modvat credit could not be denied merely because input invoices stood in the name of loan-licensees where the assessee contended that those loan-licensees used the inputs in manufacture. The department did not rebut that contention with material, and the record did not show any misuse of the scheme by the assessee. In excise law, more than one manufacturer may operate in the same factory, and a loan-licensee may utilise Modvat credit for duty on goods manufactured by it. On that reasoning, denial of credit was held unsustainable, the impugned order was set aside, and the appeal was allowed, with liberty to proceed against the person who actually utilised the credit.

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Issues: Whether Modvat credit could be denied to the appellant on the ground that the input invoices stood in the names of loan-licensees and the Commissioner (Appeals) had not addressed the appellant's contention that the inputs were used by those loan-licensees in manufacture.

Analysis: The order under challenge did not examine the specific remand issue and gave no clear reasoning for rejecting the appellant's case. In excise law, more than one manufacturer may operate in the same factory, and a loan-licensee manufacturing goods therein may utilise Modvat credit for duty on goods manufactured by it. The appellant's contention that it was not the manufacturer was not rebutted by any material from the department, and the invoices being in the names of the loan-licensees did not by itself establish misuse of the scheme against the appellant.

Conclusion: The denial of Modvat credit was unsustainable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed, leaving liberty to proceed against the person, if any, who had actually utilised the credit.

Ratio Decidendi: Where the department does not rebut the assessee's contention that another registered manufacturer or loan-licensee used the inputs in manufacture, Modvat credit cannot be denied merely because the invoices stand in another's name.

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