Modvat credit for export inputs cannot be denied for lack of one-to-one correlation; procedural lapse alone is insufficient.

Modvat credit on inputs used in exported final products could not be denied merely because the inputs were not separately declared for the duty-paid goods or because one-to-one correlation with finished products was not shown. The absence of such exact correlation was treated as a procedural issue, not a ground to reverse otherwise admissible credit. Credit accumulated from exports could also be utilised for duty payment on other final products cleared by the assessee. On that basis, reversal of Modvat credit was not justified, and the consequential penalty and interest also could not be sustained.

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Issues: Whether Modvat credit availed on inputs used in export products could be denied or reversed on the ground that the inputs were not declared for the finished goods on which duty was paid, and whether penalty and interest could survive consequentially.

Analysis: The credit on the inputs was otherwise admissible and the inputs had been used in manufacture of final products exported out of the country. The Court treated the absence of one-to-one correlation between particular inputs and finished products as a procedural matter, and held that credit availment and utilisation could not be denied on that basis. It further noted that credit accumulating because of exports could be used for duty payment on other final products cleared by the assessee.

Conclusion: The reversal of Modvat credit was not justified, and the consequential penalty and interest also could not be sustained.

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