Modvat credit on delivery challan supported by later duty proof and gate pass return was restored under the credit scheme.

Modvat credit could not be denied merely because the inputs were accompanied by a delivery challan instead of the prescribed duty-paying document, where the challan recorded the relevant duty debit particulars and the original gate pass was returned with the goods after processing. The subsequent issuance of a regular gate pass, read with the departmental instruction allowing credit to be taken and kept unutilised until production of the duty-paying document, supported restoration of credit. The scheme under Rule 57E, recognising subsequent duty payment for credit purposes, and the procedure under Rule 57F also supported the assessee's entitlement to credit.

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Issues: Whether modvat credit could be denied merely because the inputs were accompanied by a delivery challan instead of a prescribed duty-paying document, where the duty debit was subsequently evidenced and the goods were returned with the original gate pass.

Analysis: The delivery challan was not a prescribed document under Rule 57G, but the surrounding facts showed that the goods had been returned after processing along with the original gate pass and that the challan recorded the relevant PLA debit and duty particulars. The subsequent issuance of a regular gate pass, together with the departmental instruction that credit may be taken and kept unutilised until production of the duty-paying document, supported restoration of credit. The matter was also viewed in the light of the scheme of Rule 57E, which recognises subsequent duty payment for credit purposes, and the availability of the procedure under Rule 57F.

Conclusion: The denial of modvat credit was not justified and the assessee was entitled to the credit.

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