Modvat credit on capital goods cannot be denied for pre-installation availment when substantive conditions are met and use follows installation.

Modvat credit on duty-paid capital goods could not be denied merely because it was taken before installation or before filing the declaration, where the relevant period was prior to 1-1-1996 and the prohibition against pre-installation availment was not yet in force. The goods were received in the factory, ultimately used in manufacture of dutiable final products, and the credit was utilised only after installation. The failure to file the declaration before receipt was treated as a minor procedural infraction, not a ground to defeat substantive entitlement. Accordingly, denial of credit was unjustified and the assessee was entitled to avail it.

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Issues: Whether Modvat credit on capital goods could be denied merely because it was availed before installation of the capital goods and before filing the declaration.

Analysis: The period in dispute was prior to 1-1-1996, when the prohibition against availment of credit before installation was not in force. The capital goods were duty paid, received in the factory, and ultimately used in the manufacture of dutiable final products. The denial was founded only on a procedural lapse in not filing the declaration before receipt of the capital goods. Such a lapse was treated as a minor procedural infraction, and the credit was in any event utilised only after installation.

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

Ratio Decidendi: For capital goods received before the introduction of the prohibition, Modvat credit cannot be denied merely for pre-installation availment or a procedural defect in filing declaration where substantive conditions are satisfied and the credit is used after installation.

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