Modvat credit cannot be denied for later xerox copies when valid invoices and required certificate were originally complied with.

Modvat credit could not be denied where the assessee had initially taken credit on valid duty-paying duplicate invoices and the prescribed Rule 57E certificate, and the procedural requirements for monthly RT 12 reporting and defacement were substantially complied with. The department did not dispute compliance with the required filing procedure or raise any objection about non-filing of documents. Xerox copies produced later during audit were insufficient, by themselves, to justify disallowance of credit. The related interest and penalties were therefore not sustainable, and the disallowance of credit was set aside.

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Issues: Whether Modvat credit could be denied merely because xerox copies of invoices were produced during verification when the credit had originally been taken on duplicate invoices and the prescribed Rule 57E certificate, and whether the consequential interest and penalties could survive.

Analysis: The relevant procedure required filing of monthly RT 12 returns with duplicate copies of invoices and the original Rule 57E certificate for defacement, together with particulars of the capital goods received and the credit taken. The record showed that the department did not dispute compliance with that procedure and no objection had been raised about non-filing of the required documents. On the facts, the credit was initially availed on valid duty paying documents, and the later production of xerox copies during audit did not justify denial of credit.

Conclusion: Modvat credit was wrongly disallowed and the related interest and penalties were not sustainable.

Final Conclusion: The appeal succeeded and the order disallowing credit and imposing consequential liability was set aside.

Ratio Decidendi: Modvat credit cannot be denied when the assessee had initially availed it on valid prescribed documents and the procedural requirements for reporting and defacement were substantially complied with, merely because xerox copies were later produced in audit.

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