Modvat credit cannot be denied for a procedural declaration lapse where the by-product was substantially disclosed and inputs were protected.

Modvat credit could not be denied merely because hydrochloric acid, treated as a by-product, was omitted from the initial declaration. The omission was later cured by amendment and was treated as a technical, procedural irregularity because the goods were substantially disclosed. Credit also remained available where the inputs were used in the manufacture of a by-product or waste product, since Rule 57D protected such inputs. Denial of credit was therefore unsustainable, and the assessee was entitled to the credit benefit.

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Issues: Whether Modvat credit could be denied merely because hydrochloric acid, a by-product, was not initially declared in the relevant declaration, and whether credit remained available where the inputs went into the by-product or waste product.

Analysis: The declaration was later amended to include hydrochloric acid, and the omission was treated as technical and procedural rather than substantive. The reasoning adopted from the later period order emphasised that the goods had been substantially disclosed and that non-mention in a particular column of the declaration was only a procedural irregularity. The order further noted that Rule 57D preserved credit on inputs used in the manufacture of by-products or waste products, and that this provision had been overlooked in the earlier period.

Conclusion: The denial of Modvat credit was not sustainable, and the assessee was entitled to the credit benefit.

Final Conclusion: The appeal succeeded and the assessee obtained the consequential relief flowing from allowance of credit.

Ratio Decidendi: A technical or procedural omission in declaration does not justify denial of Modvat credit where the by-product is substantially disclosed and the inputs fall within the protective scope of Rule 57D.

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