Proforma credit cannot be denied for procedural lapse where duty-paid inputs were received and used in manufacture.

Proforma credit could not be denied where receipt of duty-paid inputs, their duty-paid character, and their use in manufacture were not disputed. The only objection was procedural non-compliance, namely delay in filing the D-3 declaration and non-availability of the goods for verification. The text states that such technical lapse did not justify forfeiture of the substantive credit benefit, especially where the inputs had already suffered duty and were used in producing dutiable goods. At most, the procedural default could attract a warning or penalty, but not denial of credit. The assessee was therefore entitled to proforma credit.

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Issues: Whether proforma credit could be denied for delay in filing the D-3 declaration and non-availability of the goods for verification when receipt of duty-paid inputs and their use in production were not disputed.

Analysis: The only objection raised by the department was breach of procedural requirements under the relevant excise rules. The receipt of the goods, their duty-paid character, and their use in further manufacture were not in dispute. Denial of credit on such technical lapse would result in double incidence of duty even though the inputs had already borne duty and were used in production of dutiable goods. The procedural default, at the highest, could justify a warning or penalty, but not forfeiture of the substantive benefit of credit.

Conclusion: The assessee was entitled to the proforma credit, and denial of credit on the ground of procedural irregularity was not justified.

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