Modvat credit admissible where a nil-duty gate pass properly cross-referenced the original duty-paid document and supported proof existed.

Modvat credit was held admissible where the inputs were supported by a nil-duty gate pass that cross-referenced the original duty-paying gate pass and the original document was produced. The Tribunal treated the combined documents, together with certification and retention of the original for defacement, as sufficient proof that duty had been paid for Modvat purposes. A nil-duty gate pass was therefore not fatal if it properly linked back to the duty-paid document and prevented double credit. On those facts, denial of credit was unsustainable.

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Issues: Whether Modvat credit could be denied merely because the gate pass received by the assessee showed nil duty, when it carried a cross-reference to the original duty-paying gate pass and the original duty-paying document was also produced.

Analysis: The relevant test was whether the inputs were accompanied by sufficient proof of duty payment for Modvat purposes. The document in the assessee's name referred to the original gate pass under which duty had been paid, and the supplier had been permitted to receive duty-paid goods for reprocessing under Rule 173H of the Central Excise Rules, 1944. The Tribunal followed its earlier view that a nil-duty gate pass bearing a proper cross-reference to the original gate pass, together with supporting certification, could satisfy the requirement of a duty-paying document. The original duty-paying document was also required to be retained and defaced to prevent double credit.

Conclusion: Modvat credit was admissible to the assessee on the strength of the documents produced, and the denial of credit was unsustainable.

Ratio Decidendi: Where a nil-duty gate pass contains a proper cross-reference to the original duty-paying document and the original document is produced, the requirement of a duty-paying document for Modvat credit is satisfied.

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