Modvat credit cannot be denied for a dealer's procedural lapse when the manufacturer's documents are proper and undisputed.

Modvat credit could not be denied to a manufacturer where the manufacturer's own duty-related documents were in order and no discrepancy or fraud was shown against it. The alleged irregularity related only to the registered dealer's manner of passing on credit under Rule 57GG, and that procedural lapse was attributable to the dealer, not the assessee. As the dealer was not impleaded and the assessee's documents remained undisputed, the manufacturer could not be penalised for the dealer's fault. The Revenue's challenge failed and the allowance of Modvat credit was sustained.

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Issues: Whether Modvat credit could be denied to the manufacturer when the credit-issuing dealer's invoices were alleged to be irregular, but the manufacturer's own documents were not found discrepant and the dealer was not impleaded in the proceedings.

Analysis: The credit taken by the assessee was supported by the documents on which it relied, and no discrepancy was found in those documents. The alleged defect related only to the manner in which the registered dealer had passed on credit under Rule 57GG. In such circumstances, the irregularity, if any, was attributable to the dealer. The assessee could not be penalised for the dealer's fault, particularly when the dealer was not made a party to the proceedings.

Conclusion: Modvat credit could not be denied to the assessee on the basis of the dealer's alleged lapse. The appeal by Revenue failed.

Final Conclusion: The order allowing the assessee's Modvat credit was sustained and the Revenue's challenge was rejected.

Ratio Decidendi: A manufacturer cannot be denied Modvat credit for a dealer's procedural lapse when the manufacturer's own duty-related documents are in order and no fraud or discrepancy is shown against the manufacturer.

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