Modvat credit cannot be denied for late return of inputs where substantive conditions are otherwise satisfied

Modvat credit could not be denied merely because inputs sent to job workers were received back after 60 days and the extension request was filed after that period, since the rule did not expressly require a pre-expiry application. Where the substantive conditions for Modvat credit were otherwise satisfied, denial of credit and penalty for this procedural lapse was unwarranted. The issue was therefore decided in favour of the assessee.

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Issues: Whether Modvat credit could be denied merely because inputs sent to job workers were received back after 60 days and the request for extension of time was made after the expiry of that period.

Analysis: The appellants had sent inputs to job workers in accordance with the Modvat scheme and the only objection was the delayed return of the goods beyond 60 days. The rule did not expressly require that the request for extension must be filed before the expiry of the original 60-day period. In the absence of such stipulation, denial of credit and imposition of penalty for this procedural lapse was unwarranted, particularly when the substantive conditions for Modvat credit were otherwise satisfied.

Conclusion: The denial of Modvat credit was not justified and the issue was decided in favour of the assessee.

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