Modvat credit on capital goods cannot be denied solely for want of prior permission when duty-paid receipt and installation are established.

Modvat credit on capital goods installed in a factory through a contractor or job worker could not be denied merely because prior permission of the Assistant Commissioner was not obtained under Rule 57T(3) / Rule 57T(7). The document states that duty-paid documents were in order, duty payment on the capital goods was not disputed, and the goods were actually received and installed in the factory. The rule was treated as enabling the Assistant Commissioner to allow credit on sufficient cause, not as making prior permission a condition precedent to availment of credit. Denial of credit on that sole ground was therefore unsustainable.

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Issues: Whether Modvat credit on capital goods installed in the factory by a contractor or job worker could be denied solely because prior permission of the Assistant Commissioner was not obtained under Rule 57T(3) / Rule 57T(7) of the Central Excise Rules.

Analysis: The show cause notice proceeded only on the alleged absence of prior permission. The duty-paid documents did not show any deficiency, the duty payment on the capital goods was not in dispute, and the capital goods were in fact received and installed in the appellant's factory through the job contractor. The rule enabled the Assistant Commissioner to allow credit on sufficient cause being shown; it did not make prior permission a condition precedent for availment of credit. Credit therefore could not be disallowed merely for want of prior permission when the factual basis for the credit was otherwise established.

Conclusion: The denial of Modvat credit was unsustainable; the issue is answered in favour of the assessee.

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