Modvat credit cannot be denied for wrong register entries when entitlement exists and returns disclose the transactions.

Modvat credit under Rule 57A could not be denied merely because entries were made in RG-23 instead of RG-23A after the transition from Rule 56A, where the assessee was otherwise entitled to the credit and the relevant transactions were disclosed in the returns. The incorrect register entry was treated as a procedural lapse linked to the scheme transition, not as a substantive misuse of the credit facility. However, the procedural requirements of the credit scheme were not ignored entirely, and a monetary penalty was sustained. Credit restoration was allowed, subject to reduction of Rs. 15,000 as penalty.

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Issues: Whether Modvat credit could be denied for entries made in the earlier register after the shift from Rule 56A to Rule 57A, when the assessee was otherwise entitled to the credit and the transactions had been reported in the returns.

Analysis: The assessee was entitled to Modvat credit under Rule 57A from the date of its introduction and the credit-related transactions were duly reflected in the returns filed before the department. The wrong entry in RG-23 instead of RG-23A was treated as a procedural lapse arising from the transition between the two schemes, not as a substantive misuse of the credit facility. At the same time, procedural requirements under the credit scheme could not be ignored entirely, and some consequence for the lapse was considered justified.

Conclusion: Denial of the credit was not justified. The assessee was entitled to restoration of the credit, subject to reduction of Rs. 15,000/- by way of penalty.

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