Modvat credit on capital goods cannot be denied for procedural delay where Board circulars recognise practical filing delays.

Modvat credit on duty-paid capital goods cannot be denied solely because declaration and intimation were filed late when the delay arose from installation, repairs, or initial operational difficulties. The applicable Board circular recognised that credit on capital goods may not always be taken within the prescribed period, and the Revenue was bound by that instruction. As the machinery's eligibility and duty-paid character were undisputed, procedural delay could not defeat the credit claim. The disallowance of credit and associated penalty were therefore set aside in favour of the assessee.

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Issues: Whether Modvat credit on capital goods could be denied merely because the declaration and intimation were filed belatedly under the applicable Central Excise Rules.

Analysis: The delay was explained by the need to install the machine, complete repairs, and overcome initial teething troubles in a small-scale unit. The Board's circular recognised that, in the case of capital goods, credit may not always be availed within the prescribed period, and the Revenue was bound by that instruction. Since the duty-paid nature of the machine and its eligibility for credit were not in dispute, the procedural delay could not be used to defeat the credit claim.

Conclusion: The denial of Modvat credit was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The order disallowing credit and imposing penalty was set aside, and the appeal succeeded.

Ratio Decidendi: Where capital goods are duty paid and eligible, Modvat credit cannot be denied solely for delay in procedural compliance when the controlling Board circular recognises such practical delay and binds the Revenue.

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