Modvat credit cannot be denied for an invoice defect alone when duty-paid inputs are received and used in manufacture.

Modvat credit could not be denied merely because the dealer's invoices showed an incorrect despatch source when the inputs were received in the factory, their duty-paid character was not disputed, and their use in manufacture was established. The invoice defect was attributable to the dealer, not the assessee, and by itself did not justify disallowance of credit. On the same reasoning, the connected penalty and interest were also unsustainable. The impugned order was therefore set aside for all three appellants.

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Issues: Whether Modvat credit could be denied and penalty and interest sustained merely because the invoices showed a wrong despatch source, although the inputs were received in the factory and their duty-paid nature and use in manufacture were not disputed.

Analysis: The dispute turned on the authenticity and co-relation of invoices issued by the dealer. The record showed that the appellants had received the inputs in their factory and had made payment to the dealer, while the only defect alleged was that the invoices mentioned despatch from Abohar though the material had allegedly originated elsewhere. The defect in the invoices was treated as attributable to the dealer, not to the appellants. Since the receipt of goods, their duty-paid character, and their use in manufacture were not disproved, the wrong description of the despatch source could not by itself justify denial of credit. The same reasoning applied to all three appeals because the facts and issue were materially identical.

Conclusion: Modvat credit was admissible and the denial of credit, along with the connected penalty and interest, was not sustainable.

Final Conclusion: The impugned order was set aside in relation to all three appellants, and their appeals succeeded.

Ratio Decidendi: A mere defect or incorrect particulars in an invoice does not justify denial of Modvat credit where receipt of duty-paid inputs in the factory and their use in manufacture are established and remain undisputed.

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