Substantive compliance protects Modvat credit: technical defects and unproven suspicion cannot defeat a genuine input credit claim.
Modvat credit cannot be denied where the claim is supported by substantive compliance and only a technical or procedural defect is present. A clerical excess-duty payment corrected promptly before filing the RT 12 return, and brought to the competent authority's notice, was treated as a rectifiable error, so the adjustment was allowed. Credit was also upheld on a duplicate depot-clearance invoice bearing the prescribed transport-copy endorsement and attested manufacturer's stamp, because duty-paid goods were received in the factory and eligibility as inputs was undisputed; pre-authentication objections or suspicion of later authentication could not defeat the claim. The impugned orders were therefore unsustainable.
Issues: (i) Whether credit of excess duty paid due to a clerical error and later adjusted by the assessee could be denied on the ground that the correction was not made through the prescribed supervisory procedure. (ii) Whether Modvat credit could be denied on a duplicate invoice of depot clearance bearing the prescribed transport copy endorsement and an attested stamp, merely for want of pre-authentication or on a suspicion of later authentication.
Issue (i): Whether credit of excess duty paid due to a clerical error and later adjusted by the assessee could be denied on the ground that the correction was not made through the prescribed supervisory procedure.
Analysis: The excess payment arose from a technical and clerical mistake. The correction was made promptly before submission of the RT 12 return and the assessee brought the facts to the notice of the competent authority. The materials relied upon showed that such mistakes, if detected in time, could be rectified by appropriate entries, and the same principle was applicable to the adjustment made in the Modvat records.
Conclusion: The denial of credit on this issue was not justified and the assessee was entitled to the adjustment.
Issue (ii): Whether Modvat credit could be denied on a duplicate invoice of depot clearance bearing the prescribed transport copy endorsement and an attested stamp, merely for want of pre-authentication or on a suspicion of later authentication.
Analysis: There was no dispute about duty-paid character of the goods, their receipt in the factory, or their eligibility as inputs. The invoice bore the printed endorsement for taking Modvat credit, the attested stamp of the manufacturer, and was a document of the type prescribed for Modvat purposes. In such circumstances, a purely technical objection based on pre-authentication could not override substantive compliance, and credit could not be denied on suspicion alone.
Conclusion: The denial of Modvat credit on this issue was not justified and the assessee was entitled to the credit.
Final Conclusion: The impugned orders were unsustainable, and the assessee succeeded on both issues on the basis of substantive compliance and rectifiable technical error.
Ratio Decidendi: Where a duty or Modvat credit claim is supported by substantive compliance and the defect is only technical or procedural, the benefit cannot be denied merely on suspicion or on minor lapses that do not affect the genuineness of the claim.