Modvat credit cannot be denied solely for premature transitional filing where substantive entitlement and revenue neutrality remain in issue.

Taking Modvat credit before filing the transitional declaration under Rule 57H was a procedural contravention, but it could not by itself justify denial of the substantive credit where the exercise was revenue neutral. If the credit was reversed and later re-taken after the claim was allowed, no revenue prejudice arose. The assessee had to be given an opportunity to prove that the inputs were in stock as such or contained in finished goods. Denial on the procedural lapse alone was therefore unjustified, and the matter was remanded for fresh decision on evidence.

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Issues: Whether Modvat credit under Rule 57H could be denied merely because the assessee had taken credit before filing the transitional declaration and whether the matter required reconsideration after permitting the assessee to produce evidence of stock of inputs or finished goods.

Analysis: Taking credit before formal permission under Rule 57H was a contravention of procedure, but not a ground by itself to deny the substantive Modvat benefit where the exercise was revenue neutral. If the credit was reversed and later re-taken on allowance of the claim, no revenue prejudice would arise. The denial could not rest solely on this procedural lapse, and the assessee had to be given an opportunity to establish that the inputs were lying in stock as such or contained in finished goods.

Conclusion: Denial of credit on the procedural ground alone was unjustified. The order was set aside and the matter was remanded for fresh decision after giving the assessee an opportunity to adduce evidence.

Final Conclusion: The assessee succeeded on the core challenge, but the entitlement to credit was left for fresh adjudication on the evidence to be produced before the authority.

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