Modvat credit for capital goods in a new factory was upheld despite declaration being filed after receipt of goods.

Modvat credit on capital goods received before registration of a newly established factory could not be denied merely because the declaration was filed after receipt of the goods. The Tribunal treated the relevant period under Rule 57T as running from the date of factory registration in the case of a new unit, and not from the earlier date of receipt of the capital goods. It also accepted that uncertainty about filing requirements during the construction stage justified a liberal approach. Credit was therefore held admissible and the order disallowing it was set aside.

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Issues: Whether Modvat credit on capital goods received before registration of the factory could be denied on the ground that the declaration was filed after receipt of the goods, and whether the relevant period under Rule 57T should be counted from the date of registration of the factory.

Analysis: The factory was under construction when the capital goods were received, and the declaration for Modvat credit was filed before registration. The Tribunal followed earlier decisions holding that in the case of a new factory, the period under Rule 57T is to be reckoned from the date of registration, and that credit should not be denied merely because the declaration was not filed simultaneously with receipt of the capital goods. The reasoning also proceeded on the basis that there was uncertainty regarding filing requirements for a factory under establishment and that a denial of credit in such circumstances would be unjust.

Conclusion: The assessee was entitled to Modvat credit on the capital goods, and the impugned order denying credit was set aside.

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