Technical breach in proforma credit procedure cannot sustain penalty where duty payment evidence supports reconsideration of the credit claim.

A procedural lapse in claiming proforma credit was treated as technical where the assessee had made repeated efforts to obtain the required certificates, produced delivery challans and jurisdictional excise certificates, and showed that duty had been paid on the goods. In the absence of mala fides, the penalty was held unsustainable, and the substantive credit claim required fresh examination because relevant documentary evidence had not been considered earlier. The matter was remanded for reconsideration of the proforma credit entitlement on the basis of the additional evidence and for appropriate orders.

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Issues: Whether the assessee's breach of the procedure for availing proforma credit was merely technical, so as to justify setting aside the penalty and requiring reconsideration of the credit claim on the basis of documentary evidence produced at the appellate stage.

Analysis: The assessee had difficulty complying with the prescribed procedure for proforma credit because the goods were first sold to a stockyard and then transferred to the manufacturing unit. The record showed repeated attempts to secure the necessary certificates and to establish that duty had in fact been paid on the billets. Documentary evidence was produced, including delivery challans and certificates from the jurisdictional excise authorities, which supported the duty-paid character of the goods. In these circumstances, the procedural lapse was treated as technical, and no mala fides were found. Since relevant evidence bearing on duty payment had not been examined in the earlier proceedings, the claim required fresh consideration.

Conclusion: The penalty was not sustainable, and the matter was remanded to the Collector for examination of the proforma credit claim on the basis of the additional documentary evidence and for passing appropriate orders.

Ratio Decidendi: A merely technical breach of procedure, unaccompanied by mala fides and supported by evidence of duty payment, does not justify penal action and may warrant reconsideration of substantive entitlement to credit.

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