MODVAT credit on job-work inputs upheld where duty-paid documents were entered in RG 23A Part I before processing returned

MODVAT credit was held admissible where duty-paid inputs were sent directly to a job-worker, the duty-paying documents were entered in RG 23A Part I within the prescribed period, and RG 23A Part II credit was taken only after the processed inputs were received back. The Tribunal treated Rule 57G as satisfied by valid entry of the inputs in RG 23A Part I and rejected the argument that physical receipt in the factory was necessary before credit could be allowed in such job-work arrangements. Following a consistent line of authority, and despite consideration of the Board circular, the denial of credit was found unsustainable.

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Issues: Whether the assessee was entitled to MODVAT credit when duty-paid inputs were sent directly to a job-worker and the credit in RG 23A Part I was taken on receipt of the duty-paying documents, though RG 23A Part II credit was taken only after the processed inputs were received back from the job-worker.

Analysis: The inputs were covered by duty-paying documents and were accounted for in RG 23A Part I within the prescribed period. The dispute turned on whether Rule 57G(5) required physical receipt of the inputs in the factory before credit could be treated as valid in such job-work situations. The Tribunal noted that the cited decisions had consistently held that credit taken in RG 23A Part I satisfied the obligation under Rule 57G, and that no contrary binding view was produced. The Board circular was also considered, but the Tribunal followed the consistent line of authority supporting the assessee.

Conclusion: The assessee was entitled to the MODVAT credit and the denial of credit was not sustainable.

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