Modvat credit on re-imported goods upheld where separate accounts were maintained through contemporaneous records, despite no separate physical register.

Modvat credit on countervailing duty paid at re-import was not to be denied merely because the assessee had also availed small-scale exemption for home clearances, where the re-imported goods were separately accounted for, stored separately, intimated to the department, and reflected in RG-23A Part I. The substantive requirement of maintaining separate accounts was treated as satisfied by contemporaneous equivalent records, and the absence of a separate physical register in the exact departmental format was only a procedural objection. A Board circular supporting simultaneous exemption for home clearances and credit on inputs used for export production also reinforced entitlement to credit.

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Issues: Whether Modvat credit of countervailing duty paid on re-import of earlier exported goods could be denied when the assessee had opted for small scale exemption, and whether the records maintained for the re-imported/export goods satisfied the requirement of maintaining separate accounts.

Analysis: The dispute turned on whether the goods re-imported for further processing and re-export could be treated as distinct from goods cleared for home consumption under Notification No. 8/03 dated 1-3-2003. The record showed that the assessee had separately accounted for the re-imported goods, kept them separately stored, made intimation to the department, and reflected them in RG-23A Part I. The Board circular permitting simultaneous availing of exemption for home clearances and credit on inputs used for export production also supported the assessee's entitlement. The denial by the lower authority was based only on a procedural objection that a separate register was not maintained, although the substantive requirement of separate recording was otherwise met.

Conclusion: The credit could not be denied on the procedural ground relied upon below, and the assessee was entitled to the Modvat credit with consequential relief.

Ratio Decidendi: Where the substantive requirement of maintaining separate accounts is satisfied through equivalent contemporaneous records, Modvat credit cannot be denied merely because the assessee did not maintain a separate physical register in the exact form expected by the department.

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