Modvat credit on transit sales remains valid when manufacturer invoices and endorsed transport documents prove receipt of goods.

In a transit sale, Modvat credit is available where the manufacturer's Rule 52A invoice and endorsed transport documents establish the movement and receipt of the goods. The Board's circular clarified that such invoices are valid duty-paying documents, no separate invoice under Rule 57G is required, and participants in the transit sale need not be registered. On that basis, credit cannot be denied merely because the intermediary dealer is unregistered, provided the full consignment covered by the manufacturer's invoices has been received.

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Issues: Whether Modvat credit taken on inputs received in a transit sale on the basis of the manufacturer's Rule 52A invoice and the endorsed transport documents was admissible, and whether such credit could be denied because the intermediary dealer was unregistered.

Analysis: The inputs were found to have been received in a transit sale. The manufacturer's invoice issued under Rule 52A, together with the endorsements on the transport document, established the nature of the transaction. The Board's Circular No. 218/52/96-C.X. clarified that in such cases the manufacturer's invoice is a valid duty paying document, no separate invoice under Rule 57G is required, and persons participating in the transit sale need not be registered. Since the entire consignment covered by the manufacturer's invoices had been received by the respondents, the credit could not be denied on the ground of non-registration of the dealer.

Conclusion: The respondents were entitled to Modvat credit on the strength of the manufacturer's invoices and connected documents, and the denial of credit was not justified.

Ratio Decidendi: In a transit sale, the manufacturer's invoice issued under Rule 52A, when supported by the endorsed transport documents and receipt of the goods, constitutes a valid basis for Modvat credit, and the absence of registration of the intermediary dealer does not by itself defeat the credit.

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