MODVAT credit denied where valid duty-paid gate pass was not proved and later duty payment did not cure the defect.

MODVAT credit was treated as unavailable where the assessees could not produce verifiable evidence that the inputs were received under a valid duty-paid gate pass. The record showed that the gate pass said to cover the goods was not produced and that the earlier gate pass had been issued without duty debit, creating serious doubt about the receipt of consignments under the corrected document. On those facts, the credit already taken could not be sustained. Subsequent payment of duty by the supplier did not validate credit that had been wrongly availed earlier, so reversal of the credit was upheld.

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Issues: Whether MODVAT credit could be allowed when the inputs were claimed to be duty-paid but the assessees failed to produce verifiable evidence that the goods were received under the corrected gate pass and the earlier gate pass had been issued without duty debit.

Analysis: The majority held that the assessees had not produced the gate pass said to relate to the goods and that the record created serious doubt about receipt of the consignments under the revised gate pass. In the absence of reliable proof that the inputs were covered by the valid duty-paid gate pass at the relevant time, the credit already taken could not be sustained. It was further held that subsequent payment of duty by the supplier did not regularise a credit that had been wrongly taken earlier.

Conclusion: MODVAT credit was not admissible on the facts proved, and the order directing reversal of credit was upheld.

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