Modvat credit and procedural delay: bona fide receipt of inputs under departmental permission saved the assessee's credit claim.

Modvat credit could not be denied merely because the final lot of invoice-covered inputs was received after six months, where the assessee acted on the Superintendent's direction to receive the goods in smaller lots and store them outside the factory. The restriction was procedural, the arrangement was bona fide, and the departmental trade notice permitted credit in such circumstances when inputs were received at an outside storage place and then brought into the factory in the prescribed manner. On those facts, the six-month stipulation did not justify disallowance of credit, and the question of law was answered in favour of the assessee.

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Issues: (i) Whether Modvat credit could be denied on the ground that the last lot of inputs covered by the invoice was received after six months, despite the Superintendent's permission to store the goods outside the factory and the departmental trade notice permitting credit in such circumstances.

Analysis: The credit restriction was procedural in nature and, on the facts, the assessee had acted on the Superintendent's direction to receive the goods in smaller lots and avail credit on receipt of the final lot. The transaction was bona fide, there was no deliberate delay, and the departmental trade notice recognised that credit could be taken where inputs were received at an outside storage place and brought into the factory in the prescribed manner. In these circumstances, the six-month stipulation did not warrant denial of credit.

Conclusion: The assessee was entitled to Modvat credit and the question of law was answered in its favour.

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