Modvat credit cannot be denied for a chapter-heading mismatch when goods are correctly identified and documents substantially tally.

Modvat credit could not be denied where the goods were correctly identified as hard facing rods and the declaration and gate passes otherwise substantially tallied; a wrong chapter heading on third-party gate passes, by itself, was not a valid basis for refusal when the discrepancy was beyond the manufacturer's control. On that footing, there was no contravention of law, so the penalty was not sustainable.

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Issues: Whether Modvat credit could be denied merely because the gate passes showed a different chapter heading, despite the item being correctly described and the declaration otherwise tallying; and whether penalty was sustainable in such circumstances.

Analysis: The item on which credit was taken was correctly identified as hard facing rods, and the description in the declaration and gate passes substantially matched. The only mismatch was in the chapter heading mentioned on the gate passes, which were third-party documents beyond the manufacturer's control. Such a discrepancy, when the rest of the particulars tally, was not a valid ground to refuse Modvat credit. Since there was no contravention of law, the penal provision could not be invoked.

Conclusion: Modvat credit could not be denied on the basis of the chapter-heading discrepancy alone, and the penalty was not justified.

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