Modvat credit cannot be denied for a mere procedural lapse where substantive entitlement is otherwise established.

A procedural lapse in taking Modvat credit before receipt of the full quantity of inputs, and without the accompanying duty-paying documents, was treated as inadvertent and not sufficient to defeat the manufacturer's substantive entitlement. The court declined to deny credit on that basis alone, holding that a mere irregularity in procedure cannot override an otherwise established right to Modvat benefit. The Revenue's challenge therefore failed, and the assessee's claim to credit was sustained.

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Issues: Whether Modvat credit could be denied for a procedural lapse in availing credit before receipt of the entire quantity of inputs and without accompanying duty-paying documents, and whether such lapse warranted recovery and penalty.

Analysis: The questions referred were held not to arise on the facts. The lapse in taking credit was treated as inadvertent and not of such gravity as to defeat the manufacturer's substantive entitlement to Modvat credit. The court therefore declined to treat the procedural irregularity as sufficient, by itself, to deny the credit claimed.

Conclusion: The issue was decided in favour of the assessee, and the Revenue's challenge failed.

Ratio Decidendi: A mere inadvertent procedural lapse cannot be used to deny a substantive Modvat benefit where the underlying entitlement is otherwise established.

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