Modvat credit cannot be denied for a mere procedural lapse when duty-paid capital goods are declared and used in manufacture.

Modvat credit could not be denied merely because the assessee failed to intimate the arrival of capital goods to the department where the goods were declared, duty-paid, received in the factory and used in manufacture. The record showed only a procedural lapse, while the correctness of the credit itself was not disputed. A Board circular was applied to allow credit in cases of minor procedural defects and to confine denial to instances where the credit taken was incorrect. On that basis, denial of Modvat credit was unjustified.

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Issues: Whether Modvat credit could be denied merely because the assessee had not intimated the arrival of capital goods to the department, when the goods were declared, duty-paid, received in the factory, utilised in manufacture, and the correctness of the credit was not disputed.

Analysis: The dispute rested on a procedural lapse in intimation. The record showed that a declaration had been filed and that the goods had suffered duty and were used in the manufacture of final products. The Board's circular permitted credit where only minor procedural lapses existed, and adjudication was to be pursued only where the credit taken was found to be incorrect. As there was no allegation that the credit itself was wrongly taken, the lapse was not a valid ground for denial.

Conclusion: Denial of Modvat credit was unjustified, and the Revenue's challenge failed.

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