Transitional Modvat credit under Rule 57H applies when duty-paid inputs are recorded, even if received before Rule 57G acknowledgment.

Transitional Modvat credit under Rule 57H read with Rule 57G is available where duty-paid inputs are in stock or received during the intervening period before filing the Rule 57G declaration, provided the requisite declaration is filed and the inputs are identifiable from the record. The absence of a rigid time limit for the transitional declaration was treated as significant, and credit could not be denied merely because the filing sequence placed receipt before acknowledgment, if the statutory conditions were otherwise satisfied. On that basis, the denial of Modvat credit and the consequential penalty were held unsustainable.

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Issues: Whether Modvat credit on inputs lying in stock and received before filing the declaration was admissible under Rule 57H read with Rule 57G of the Central Excise Rules, 1944.

Analysis: The inputs were in stock as on the relevant date and were also received during the intervening period before the declaration under Rule 57G was filed. A declaration under Rule 57H was filed on the same day, and the record contained the stock and receipt details. Rule 57H(1B) and Rule 57H(4) were read together as a transitional provision permitting credit where the manufacturer had filed the requisite declaration and the inputs were duty-paid and identifiable from the record. The absence of a rigid time limit for such transitional declaration was treated as significant, and the earlier authority on Rule 57H was followed to hold that the credit could not be denied merely on the basis of the filing sequence when the factual foundation was established.

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

Final Conclusion: The appeal succeeded and the denial of credit and consequential penalty could not be sustained.

Ratio Decidendi: Transitional Modvat credit is available where the manufacturer files the requisite declarations and the duty-paid inputs are shown in the record, even if the inputs were received before the Rule 57G acknowledgment, provided the statutory conditions of Rule 57H are met.

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