Modvat credit cannot be denied for procedural invoice defects when receipt, declaration, and use of inputs are undisputed.

Modvat credit cannot be denied merely because the duty-paying invoices were not in the prescribed form under Rule 52A where the input was declared, received in the factory, and used in manufacture of the final product. The scheme is intended to prevent cascading of duty, so a purely procedural irregularity does not justify denial when the substantive eligibility facts are undisputed. A vague show cause notice that fails to clearly state the alleged contravention is also unsustainable. On these facts, the denial of credit and related proceedings were liable to be set aside.

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Issues: Whether Modvat credit could be denied merely because the duty-paying invoices were not prescribed under Rule 52A, when the input was declared, received in the factory, and used in the manufacture of the declared final product.

Analysis: The object of the Modvat scheme is to prevent cascading of duty on the final product. Where the department does not dispute declaration of the input, receipt of the goods in the factory, and their use in the manufacture of the final product, credit cannot be denied on a purely procedural irregularity. The show cause notice was also found to be vague, as it did not clearly set out the alleged contravention. In such circumstances, the denial of credit was unsustainable.

Conclusion: Modvat credit could not be denied on the facts of the case, and the proceedings were liable to be set aside.

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