Modvat credit on transit sales upheld where dealer invoices and circular-based permission supported the allowance.

Modvat credit could not be denied merely because goods were sold in transit and dispatched directly by the manufacturer, where the registered dealer issued the invoice and the governing circular permitted such transit sales. The challenged credit relating to invoices and inputs was not disputed in the appeal and stood confirmed. On the remaining credit, the record disclosed no legal infirmity in the Commissioner (Appeals)' decision to allow credit on that basis. The Revenue's challenge was therefore rejected and the allowance of Modvat credit was upheld.

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Issues: Whether Modvat credit could be denied on the ground that the goods were sold in transit and dispatched directly by the manufacturer, and whether the Commissioner (Appeals) rightly allowed credit.

Analysis: The disputed credit relating to invoices and inputs was not assailed in the appeal and stood confirmed. As to the remaining credit, the Board's circular expressly permitted transit sale and did not bar Modvat credit merely because the goods were dispatched directly by the manufacturer while the dealer issued the invoice. The record also showed no legal infirmity in allowing credit on that basis.

Conclusion: The transit sale did not disentitle the respondents to Modvat credit, and the allowance of credit was upheld.

Final Conclusion: The appeal failed, and the Revenue's challenge to the allowance of Modvat credit was rejected.

Ratio Decidendi: Modvat credit cannot be denied merely because the goods were sold in transit and dispatched directly by the manufacturer, if the registered dealer issues the invoice and the governing circular permits such transit sale.

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