MODVAT credit cannot be denied for a fresh declaration lapse when duty-paid inputs were received and used in manufacture.

MODVAT credit could not be denied merely because no fresh declaration was filed under Rule 57G for the later period, where an earlier declaration had already been received by the department, the assessee had indicated that duty would be paid after crossing the SSI exemption limit, and the duty-paid inputs were actually received and used in manufacture. The amended Rule 57G and the Board circular on minor procedural lapses supported the view that substantive entitlement should not be defeated by a procedural omission, and they were treated as applicable to pending matters. Credit was therefore held admissible.

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Issues: Whether MODVAT credit on inputs could be denied for want of a fresh declaration under Rule 57G of the Central Excise Rules, 1944 after the assessee had earlier filed a declaration, availed SSI exemption, and later resumed payment of duty at concessional rate.

Analysis: The declaration filed earlier had been received by the department, and the assessee had indicated in the classification list that duty at concessional rate would be paid after crossing the exemption limit. The dispute was therefore treated as one of procedural non-compliance rather than absence of entitlement. The amended Rule 57G, by insertion of sub-rule (11) through Notification No. 7/99-C.E. (N.T.), and the Board circular clarifying that minor procedural lapses should not defeat credit, supported the view that credit could not be denied where duty-paid inputs were received and used in manufacture. The amendment and circular were treated as applicable even to pending matters.

Conclusion: MODVAT credit could not be denied merely because no fresh declaration was filed for the later period, since the earlier declaration, departmental receipt, and actual receipt and use of duty-paid inputs were established.

Final Conclusion: The denial of MODVAT credit was unsustainable and the assessee was entitled to the credit claimed.

Ratio Decidendi: Where the substantive conditions for MODVAT credit are satisfied, a mere procedural lapse in the declaration under Rule 57G does not justify denial of credit, particularly when the declaration had earlier been filed and the inputs have suffered duty and been used in manufacture.

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