Modvat credit remains available despite missed transitional filing where later duty on final products is paid and substantiated.

Modvat credit on inputs was held admissible where final products had initially been cleared as exempt or without duty, but duty was later demanded and paid. The procedural omission of filing a transitional application was not treated as fatal because the later duty liability on the final products brought the case within the Modvat scheme. Entitlement, however, remained subject to proof through duty-paying documents to the satisfaction of the jurisdictional Assistant or Deputy Commissioner.

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Issues: Whether Modvat credit on inputs was admissible when the final products had initially been treated as exempt but duty was subsequently demanded and paid, despite non-compliance with the procedural requirement of filing the transitional application.

Analysis: The goods were first cleared without payment of duty and were later held liable to Central Excise duty. In such circumstances, the governing principle applied was that credit of duty paid on inputs could not be denied merely because the assessee had not followed the prescribed Modvat procedure in relation to the earlier period. The absence of a transitional application was treated as not fatal where the duty liability on the final products had arisen later, though the assessee was required to establish entitlement through duty-paying documents to the satisfaction of the jurisdictional Assistant or Deputy Commissioner.

Conclusion: Modvat credit was admissible to the assessee for the relevant period, subject to production of duty-paying documents to the satisfaction of the jurisdictional Assistant or Deputy Commissioner.

Ratio Decidendi: Where duty on final products is subsequently demanded and paid after an earlier exempt or non-duty-paid clearance, Modvat credit on inputs cannot be denied solely for non-observance of the procedural declaration requirements, provided the substantive entitlement is otherwise established.

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