Modvat credit regularisation under Rule 57H allowed for stock inputs, but not for inputs already consumed

Modvat credit taken before filing a declaration under Rule 57G was not permissible, but Rule 57H allowed regularisation for inputs received immediately before acknowledgment of the declaration if they were lying in stock or had been received in the factory after filing. Credit could not be sustained for the input under Gate Pass No. 6 because it had already been used and was no longer in stock. Credit was admissible for the input under Gate Pass No. 9 because it remained in stock when regularisation was sought and was intended for use in the dutiable final product, so the demand to that extent was set aside.

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Issues: Whether Modvat credit taken before filing the declaration under Rule 57G could be sustained in whole or in part under Rule 57H in respect of inputs received before acknowledgment of the declaration and lying in stock.

Analysis: Credit taken prior to filing the declaration was not permissible under Rule 57G. However, Rule 57H empowered the Assistant Collector to allow credit on inputs received immediately before acknowledgment of the declaration if such inputs were lying in stock or had been received in the factory after filing the declaration. The input covered by Gate Pass No. 6 had already been utilised and was not available in stock, so credit on that item could not be regularised. The input covered by Gate Pass No. 9 was still lying in stock when regularisation was sought and was intended for use in the dutiable final product, so the credit in respect of that input was admissible under Rule 57H.

Conclusion: Credit in respect of the input received under Gate Pass No. 6 dated 23-8-1989 was not allowable. Credit in respect of the input received under Gate Pass No. 9 dated 20-10-1989 was admissible under Rule 57H and the demand to that extent was set aside.

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