Modvat credit on rectified gate passes cannot be denied for a mere technical defect when inputs were duly received and used.

Modvat credit could not be refused merely because it was taken after 30-6-1994 on corrected gate passes where the inputs had already been received earlier and entered in RG-23A Part I. The duty-paid character of the inputs, their receipt before the cut-off date, and their use in manufacture were undisputed; only the supplier's gate passes were incomplete and later rectified. In these circumstances, and given the accepted practice of allowing correction of defective duty-paying documents, denial of credit on a purely technical ground was unwarranted. The assessee was entitled to the credit.

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Issues: Whether Modvat credit could be denied merely because the credit was taken after 30-6-1994 on corrected gate passes, when the inputs had admittedly been received earlier and were duly entered in the RG-23A Part I register.

Analysis: The receipt of the reprocessed inputs before the cut-off date and their use in manufacture were not in dispute. The only defect was that the gate passes issued by the supplier were incomplete and required rectification. The delay in taking credit was attributable to the time taken to cure that technical defect. In the absence of any dispute about the duty-paid character of the inputs or their utilisation in the final product, and in view of the accepted practice of permitting rectification of defective duty-paying documents, denial of credit on a purely technical ground was unwarranted.

Conclusion: The denial of Modvat credit was not justified, and the assessee was entitled to the credit.

Ratio Decidendi: Modvat credit cannot be denied on a mere technical defect in the duty-paying document where the duty-paid inputs were received before the relevant date, were used in manufacture, and the document was subsequently rectified.

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