Modvat credit survives procedural lapse in job work when inputs are processed and used in the final product.

Modvat credit could not be denied merely because prior permission and declaration for job work were not obtained in the prescribed form under Notification No. 214/86-C.E. and Rule 57F(2), where inputs were admittedly sent to the job worker, the processed goods were returned, and those goods were used in manufacture of the final product. The procedural lapse was treated as insufficient to override the substantive requirement that the inputs be used in or in relation to final products. The Tribunal followed its earlier view in Maschmeijer Aromatics and accepted the assessee's claim to credit.

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Issues: Whether Modvat credit could be denied for non-compliance with the procedural requirements relating to job work under paragraph 2 of Notification No. 214/86-C.E. and Rule 57F(2) of the Central Excise Rules, where the inputs were admittedly sent to the job worker, processed goods were received back, and the same were used in the manufacture of the final product.

Analysis: The appeal turned on the nature of the alleged breach. The record showed that the department did not dispute the movement of inputs to the job worker, the return of processed goods, or their use in the manufacture of the final product. The defect was only that prior permission and declaration were not obtained in the prescribed manner. In such circumstances, the procedural lapse was not treated as sufficient to defeat credit where the substantive condition of use of inputs in or in relation to the final product stood satisfied. The earlier Tribunal view in Maschmeijer Aromatics was followed.

Conclusion: Modvat credit could not be denied merely for the procedural violation, and the assessee succeeded on the issue.

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