Modvat credit on returned duty-paid inputs cannot be denied when identity and correlation are proved despite absence of prior permission.

Modvat credit on duty-paid inputs returned for reprocessing could not be denied merely because prior permission had not been taken, where the record established their identity and movement under the excise procedure. The Tribunal accepted that the electron guns were originally duty-paid, returned to the supplier for reprocessing, and sent back with gate passes and certificates showing correlation with the original clearances. On that evidence, the absence of prior permission was not treated as sufficient to defeat credit, and the denial was held unjustified.

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Issues: Whether Modvat credit could be denied on electron guns returned after reprocessing on the ground that prior permission was not taken and correlation was not established.

Analysis: The goods were shown to have been originally duty-paid, returned to the supplier for reprocessing, and sent back under gate passes carrying reference to the original duty payment. Certificates from the excise authorities supported that the original suppliers had not taken credit again and that the returned quantities were identifiable. On this material, the movement of goods was treated as a permitted return after repair or reconditioning, and the Tribunal held that the goods were sufficiently correlated. The denial of credit was based mainly on absence of prior permission under the relevant rule, but the record showed that the essential factual linkage was proved.

Conclusion: The denial of Modvat credit was not justified and the appeal was allowed.

Final Conclusion: Correlated duty-paid goods returned after reprocessing could not be denied Modvat credit merely for want of prior permission when the evidence established their identity and movement under the applicable excise procedure.

Ratio Decidendi: Where returned duty-paid inputs are satisfactorily correlated with the original clearance and the statutory procedure for their re-entry is otherwise shown, Modvat credit cannot be denied solely on the ground of absence of prior permission.

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