Modvat credit for de-bonded 100% EOU cannot be denied for delayed declaration when the lapse is only technical.

Modvat credit on capital goods could not be denied to a de-bonded 100% EOU merely because the Rule 57T declaration was filed after three months from payment of duty. The capital goods were already in the unit's premises, duty had been paid after de-bonding, and Rule 57T was treated as applying to normal receipts of capital goods rather than to this distinct situation. As the Board circular did not prescribe a time limit and the delay was only a technical lapse, it did not operate as a substantive bar. Denial of credit was therefore unsustainable, and the assessee was entitled to Modvat credit.

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Issues: Whether Modvat credit on capital goods could be denied to a 100% E.O.U. on the ground that the declaration under Rule 57T was filed beyond three months from the date of payment of duty.

Analysis: The capital goods were already in the premises of the 100% E.O.U., and duty was paid after de-bonding. Rule 57T was treated as governing normal cases where a unit receives capital goods and seeks Modvat credit, and the case of a de-bonded 100% E.O.U. was held to stand on a different footing. The Board circular relied upon did not prescribe any such time limit, and the delay in filing the declaration was regarded as a technical lapse rather than a substantive bar to credit.

Conclusion: The denial of Modvat credit was unsustainable, and the assessee was entitled to the credit.

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