Modvat credit cannot be denied for a mere procedural lapse where duty-paid inputs and their use in manufacture are undisputed.

Modvat credit could not be denied merely because the assessee produced the original invoice after the duplicate invoice was lost in its factory and not in transit. The loss of the duplicate invoice was treated as a procedural lapse, not a substantive breach, because receipt of the inputs, their duty-paid character, their use in manufacture, and payment of duty on the final product were all undisputed. In the absence of mala fide intention or evidence of misuse, denial of credit on that technical ground was held unsustainable, and the credit was allowed.

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Issues: Whether Modvat credit could be denied merely because the credit was supported by the original invoice after the duplicate invoice was lost in the assessee's factory and not in transit.

Analysis: The factual position that the invoices were lost in the factory was not disputed. The credit had originally been taken on the basis of duplicate invoices, and the subsequent inability to produce them for defacement was treated as a procedural lapse only. In the absence of any dispute regarding receipt of inputs, duty-paid character of the inputs, their use in manufacture, and payment of duty on the final product, the denial of credit on this technical ground was held unsustainable. The circumstances also showed no mala fide intention or scope for misuse sufficient to justify disallowance.

Conclusion: Modvat credit could not be denied on the ground relied upon by the department, and the assessee was entitled to the credit.

Final Conclusion: The orders disallowing credit were set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Modvat credit should not be denied for a mere procedural defect where the receipt and use of duty-paid inputs are undisputed and there is no mala fide or evidence of misuse.

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