Modvat credit on imported inputs remains admissible despite interim storage in the importer's own godown and transfer to factory.

Imported inputs supported by a valid bill of entry remained eligible for Modvat credit where they were first kept in the importer's own godown and later moved to the factory in parts under stock transfer challans. The controlling factor was that the credit claim rested on the bill of entry as the duty-paying document, and the goods remained clearly correlatable to that document throughout intermediate storage and transfer. Temporary storage outside the factory did not break the link to manufacture of final dutiable goods, and the importer's own depot did not require separate registration on these facts. Modvat credit was therefore admissible.

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Issues: Whether Modvat credit could be denied merely because imported inputs were first stored in the importer's own outside godown and were later moved to the factory under stock transfer challans, where the bill of entry was the primary duty-paying document and the inputs were correlatable to that document.

Analysis: The imported inputs belonged to the assessee and were admittedly received under the bill of entry. Owing to space constraints, the goods were stored in an intermediate godown and thereafter shifted to the factory in parts under stock transfer challans. The decisive consideration was that the credit was not founded on the challans themselves, but on the bill of entry, which was the duty-paying document. The intermediate storage and piecemeal transfer did not alter the factual position that the entire quantity was meant for and used in the manufacture of final dutiable goods. The trade notice also supported the view that the importer's own depot did not require separate registration where the importer himself was the manufacturer.

Conclusion: Modvat credit was admissible and could not be denied on the ground that the goods were moved from the importer's godown to the factory under stock transfer challans.

Final Conclusion: The impugned order was set aside and the assessee's claim to credit was upheld.

Ratio Decidendi: Where imported inputs are supported by a valid bill of entry and remain clearly correlatable through intermediate storage and transfer to the factory for manufacture, Modvat credit cannot be denied merely because the goods were moved under stock transfer challans from the importer's own godown.

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