Modvat credit on imported inputs cannot be denied for absence of bill of entry endorsement when rules impose no such condition.

Modvat credit on imported inputs could not be denied merely because the bills of entry lacked an endorsement of intention to avail credit, where the inputs had been declared under Rule 57G and the bills stood in the assessee's name. The governing Central Excise Rules imposed no such statutory condition, and a Board circular could not add a requirement not found in the rules. On that basis, denial of credit, recovery demand, and penalty were unsustainable and were set aside.

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Issues: Whether Modvat credit on imported inputs could be denied merely because no declaration of intention to avail credit was endorsed on the bills of entry, when the inputs were declared under Rule 57G and the bills of entry stood in the assessee's name.

Analysis: The only objection raised by the department was based on a Board circular requiring an endorsement on the bills of entry. The governing Central Excise Rules contained no such requirement for taking credit on imported goods. In the absence of a statutory condition, credit could not be denied or recovered, and penalty could not be sustained, solely on the basis of the circular.

Conclusion: The denial of Modvat credit, the demand for recovery, and the penalty were unsustainable and were set aside in favour of the assessee.

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