Modvat credit protection for input buyers when supplier records are disputed and duty payment is shown by invoice evidence.

Modvat credit taken by the receiver of inputs cannot be denied merely because the supplier-manufacturer was alleged to have taken excess credit or because the duty entry in the supplier's records was disputed. Credit supported by invoices issued under Rule 52A and duty payment shown by debit entry in the supplier's records remained valid for the recipient. The recipient was not required to verify the supplier's Modvat records. Any discrepancy in the supplier's credit account had to be dealt with against the supplier by correction, recovery, or reversal at that end, rather than by disallowing the recipient's credit absent action against the supplier.

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Issues: Whether Modvat credit taken by the receiver of inputs could be denied merely because the input manufacturer had allegedly availed excess Modvat credit and the duty entry at the manufacturer's end was disputed.

Analysis: The credit was taken on the basis of invoices issued under Rule 52A and the documents showed duty payment by debit entry in the manufacturer's records. The final product manufacturer could not be expected to verify the Modvat records of the input manufacturer. If any discrepancy existed in the manufacturer's credit account, the proper course was to proceed against the manufacturer and require correction, recovery, or reversal at that end. The receiver's credit could not be disallowed merely because of an alleged irregularity in the supplier's account, especially when no action against the supplier was shown.

Conclusion: The denial of Modvat credit to the appellant was unjustified and the appeal was allowed.

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