Modvat credit on capital goods requires positive evidence; an uncorroborated statement cannot sustain demand or penalty.

Denial of Modvat credit on capital goods and the consequential penalty were found unsustainable because the department relied mainly on a single statement from an accounts officer who was not shown to be technically competent to verify installation or use of the goods. No panchanama, independent witness, incriminating document, or supporting investigation was produced, and there was no corroborative evidence that the capital goods were missing or that credit had been wrongly taken. The record therefore failed to provide the positive, tangible proof required to sustain demand or penalty, and the assessee succeeded.

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Issues: Whether denial of Modvat credit on capital goods and the consequential penalty were sustainable in the absence of corroborative evidence that the goods were not installed or used in the respective units.

Analysis: The dispute turned on the reliability of a single statement said to have been recorded from an accounts officer who was not shown to be technically competent to identify or comment upon the capital goods. No panchanama, independent witness testimony, incriminating document, or supporting investigation was brought on record, and the departmental case was not fortified by any circumstantial evidence. In such matters, the allegation had to be proved by positive and tangible evidence. On the record before it, the evidentiary basis was found insufficient to sustain the conclusion that the capital goods were missing or that credit had been wrongly availed.

Conclusion: Denial of Modvat credit and the penalties imposed were not sustainable; the assessee succeeded.

Ratio Decidendi: Allegations affecting Modvat credit on capital goods must be proved by credible, positive and tangible evidence, and a lone uncorroborated statement without supporting material is insufficient to sustain confirmation of demand or penalty.

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