MODVAT credit on lacquered sheets depends on proof of duty-paid input correlation, not procedural lapses alone.

MODVAT credit on lacquered sheets turns on documentary correlation between the duty paid on the plain tin sheets used as input and the lacquered sheets received in the factory. The note states that a procedural objection about sending the sheets directly for lacquering, or delay in filing extracts, cannot by itself defeat credit unless the evidence fails to establish that the declared input duty was properly linked to the goods received. On the stated facts, the denial of credit was set aside and the matter was remanded for fresh verification of correlation and supporting proof.

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Issues: Whether MODVAT credit on lacquered sheets could be denied on the ground that the plain tin sheets were sent directly for lacquering without strict compliance with the prescribed procedure, and whether the duty element on the plain sheets could be correlated with the lacquered sheets received as the declared input.

Analysis: The declaration had been filed for lacquered tin sheets, and the dispute turned on whether the credit availed represented duty paid on the declared lacquered sheets. The duty on the plain tin sheets, which were later lacquered, was treated as the relevant duty component, and no additional duty was shown to have been charged on the lacquering process. On that footing, the decisive enquiry was whether the documentary evidence established a proper correlation between the duty paid on the plain sheets and the lacquered sheets received in the factory. The procedural objection regarding the manner of sending the sheets for lacquering and the delay in filing extracts could not, by itself, resolve the entitlement without examining that correlation.

Conclusion: The denial of MODVAT credit was set aside, and the matter was remanded for de novo verification of correlation and documentary proof. The assessee was given an opportunity to substantiate entitlement to credit before the lower authority.

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