Modvat credit for maintenance inputs and procedural lapses was upheld where duty-paid receipt of inputs was undisputed.

Modvat credit remained available for inputs used in or in relation to manufacture, including items used for maintenance of machinery, because Rule 57A was construed broadly to cover the manufacturing process. Non-filing of the declaration under Rule 57G was treated as a curable procedural defect where the duty-paid character of the inputs and their receipt in the factory were undisputed. On that basis, denial of credit was not sustainable, the impugned order was set aside, and consequential relief followed.

---

---

Issues: Whether Modvat credit could be denied on the ground that the goods were used for maintenance of machinery and on the ground of non-filing of declaration.

Analysis: Rule 57A, as applicable at the relevant time, covered inputs used in or in relation to the manufacture of final products. The expression was construed broadly so as to include items used in the manufacturing process, and even where the inputs were used for maintenance of machinery, they remained eligible inputs. On the declaration issue, amended Rule 57G with sub-rule (13) recognised that credit should not be denied for minor procedural lapses where the duty-paid nature of the inputs and their receipt in the factory were not in dispute. Non-filing of declaration was therefore treated as a curable procedural defect and not a ground to deny credit otherwise available.

Conclusion: The denial of Modvat credit was not sustainable, and the appeal succeeded.

Final Conclusion: The impugned order was set aside and the appellant was held entitled to consequential relief.

Ratio Decidendi: Inputs used in relation to manufacture remain eligible for Modvat credit even when used for maintenance of machinery, and credit cannot be denied merely for a minor procedural lapse such as non-filing of declaration where the duty-paid character and receipt of the inputs are not in dispute.

---