Modvat credit verification governs exemption denial where actual availment on disputed inputs must be proved from records.

Denial of exemption under Notification No. 178/84, as amended by Notification No. 185/88, was said to depend on whether Modvat credit had actually been taken on the inputs used for the disputed clearances. The text notes that the appellants denied availment of credit for the relevant goods and said the position could be verified from statutory records. It also states that mere participation in the Modvat scheme from an earlier period was insufficient to presume credit on every consignment; actual availment required record verification. On that basis, the denial of benefit was treated as unsustainable on assumption alone and the matter was remanded for factual verification.

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Issues: Whether the denial of benefit under Notification No. 178/84, as amended by Notification No. 185/88, in respect of the disputed clearances was justified on the footing that Modvat credit had been availed on the relevant inputs.

Analysis: The appellants had specifically asserted that no Modvat credit was taken in respect of the inputs used for the goods cleared on 27-3-1989, and had also stated that this was a verifiable factual matter from their statutory records. The finding against them was based on a presumption drawn from their general use of the Modvat scheme since 1986-87. Mere participation in the Modvat scheme does not establish that credit was taken for every consignment of inputs, and the actual availment of credit required verification from the relevant records.

Conclusion: The denial of the notification benefit could not be sustained on the existing assumption and the matter required factual verification; the impugned order was set aside and the case was remanded to the adjudicating authority.

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