Modvat credit on capital goods cannot be denied for being taken after six months where no express time-limit applies.

Modvat credit on capital goods was not to be denied merely because it was taken more than six months after the invoice date. The Tribunal noted that, for the period in question, there was no express statutory time-limit governing availing of such credit on capital goods, and departmental instructions supported the permissibility of the claim. The Revenue's attempt to rely on a six-month limitation was rejected as inconsistent with the underlying legal position, and the credit was therefore allowed.

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Issues: Whether Modvat credit on capital goods could be denied on the ground that it was taken beyond six months from the date of the invoice, and whether the departmental circular supported allowance of such credit.

Analysis: The dispute turned on the absence of any express time-limit for availing Modvat credit on capital goods for the period involved. The departmental circular reflected the intention of the Revenue not to deny credit on capital goods merely because it was taken after six months, and the Tribunal found that this position could not be defeated by invoking the six-month limitation in the manner suggested by the Revenue. The Tribunal also noted that the circular's date did not justify denial of the credit where the underlying legal position did not provide an express bar for capital goods.

Conclusion: The denial of Modvat credit on the ground of six months' limitation was not sustainable, and the appeal was allowed.

Ratio Decidendi: In the absence of an express statutory time-limit for availing Modvat credit on capital goods, credit cannot be denied solely because it was taken beyond six months from the invoice date, particularly where departmental instructions indicate that such credit is permissible.

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