Procedural delay in Modvat records cannot deny credit, and later Rule 57G amendment cannot retrospectively cancel already availed credit.

Modvat credit could not be denied where inputs were actually received and used, and the delay in RG 23A entries resulted from reconciliation of misdirected consignments with supporting duty documents. The procedural lapse did not justify disallowance when receipt and use were undisputed. The later amendment to Rule 57G could not operate retrospectively to withdraw credit already validly availed before its commencement. The disallowance of credit and penalty were accordingly set aside, with consequential relief.

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Issues: (i) Whether Modvat credit could be denied merely because the inputs were entered in the records after a delay caused by reconciliation of misdirected consignments, when receipt and use of the inputs were not disputed. (ii) Whether the amendment to Rule 57G could be applied retrospectively to take away credit already availed before the amendment.

Issue (i): Whether Modvat credit could be denied merely because the inputs were entered in the records after a delay caused by reconciliation of misdirected consignments, when receipt and use of the inputs were not disputed.

Analysis: The inputs were found to have been actually received in December 1993 and there was no allegation of non-receipt or non-use in the manufacture of final products. The delay in making entries in RG 23A arose from reconciliation of duty-paying documents in the context of misdirected wagons, and the circumstances were treated as sufficient justification. Since the goods and documents were available, the credit could not be denied on a purely procedural delay in recording them.

Conclusion: The denial of Modvat credit on this ground was not sustainable and was against the assessee.

Issue (ii): Whether the amendment to Rule 57G could be applied retrospectively to take away credit already availed before the amendment.

Analysis: The credit had already been taken in January/February 1995, whereas the amendment to Rule 57G was made on 29-6-1995. The later amendment was held incapable of operating retrospectively so as to disturb credit already validly availed before its commencement. The earlier Larger Bench view was distinguished on that basis.

Conclusion: The amendment could not retrospectively defeat the credit already taken, and this issue was decided in favour of the assessee.

Final Conclusion: The impugned order disallowing Modvat credit and imposing penalty was set aside, and the appeal was allowed with consequential relief.

Ratio Decidendi: Modvat credit cannot be denied for a procedural delay in accounting where receipt and use of inputs are undisputed, and an amendment to Rule 57G cannot retrospectively cancel credit already availed before the amendment.

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