Modvat credit cannot be denied merely for defaced documents where stock evidence supports eligibility under Rule 57H.

Modvat credit could not be denied solely because invoices and gate passes were defaced or cancelled when earlier credit had been reversed on opting for exemption and the same inputs were later found in stock or in process on resumption of duty payment. Admissibility under Rule 57H had to be tested against the relevant stock position and supporting evidence for the material periods, rather than rejected on the document defect alone. The disallowance was therefore unsustainable, the order was set aside, and the matter was remanded for fresh decision after hearing the manufacturer.

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Issues: Whether Modvat credit could be denied merely because the duty-paying documents had been defaced or cancelled, and whether credit under Rule 57H was admissible on inputs found in stock or in process when the manufacturer switched from exemption to duty payment.

Analysis: The credit originally taken had been reversed when the manufacturer opted for full exemption, and the same inputs were later available in stock when duty payment was resumed. A mere defacement or cancellation of invoices and gate passes was not treated as a blanket bar to fresh availment of credit where the earlier credit had been reversed and the entitlement depended on the existence of qualifying stock on the relevant date. The admissibility of credit under Rule 57H had to be examined with reference to the stock position and supporting evidence for the relevant periods, and the earlier rejection could not stand solely on the basis of defaced documents.

Conclusion: The disallowance of credit on the ground of defaced documents was unsustainable, the impugned order was set aside, and the matter was remanded for fresh decision after granting an opportunity of hearing.

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