Modvat credit cannot be denied merely because inputs were received under Chapter X procedure without conventional duty-paying documents.

Modvat credit could not be denied where the identity and eligibility of the inputs were undisputed, the inputs were actually used in manufacture, and the requisite declaration had been filed. Receipt of the goods under Chapter X procedure and covered by GP 2, rather than accompanied by conventional duty-paying documents, did not affect the substantive entitlement to credit. The Tribunal treated the issue as covered by earlier rulings and applied Rule 57E on the facts, with the result that denial of credit was unsustainable.

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Issues: Whether modvat credit could be denied merely because the inputs were received under Chapter X procedure and covered by GP 2, instead of being accompanied by duty-paying documents.

Analysis: The appeal concerned credit on ferro alloys used as inputs in manufacture. There was no dispute as to the identity of the input, its eligibility for modvat credit, its actual use in the manufacture of final products, or the filing of the requisite declaration. The Tribunal noted that the issue was already covered by earlier rulings and that, on the facts, Rule 57E applied. The manner in which the inputs were received did not alter the substantive entitlement to credit.

Conclusion: The denial of modvat credit was not sustainable. Receipt of the inputs under Chapter X procedure and GP 2 did not disentitle the assessee to credit, and the appeal succeeded.

Ratio Decidendi: Where the identity and eligibility of inputs are undisputed and the inputs are used in manufacture after the requisite declaration, modvat credit cannot be denied merely because the goods were received under Chapter X procedure and not with conventional duty-paying documents.

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