Modvat credit cannot be denied for procedural lapse alone when records show inputs were reprocessed and used in final products.

Modvat credit cannot be denied solely for failure to obtain prior permission under Rule 57F(2) where the assessee can show, from records, that the inputs were sent to job workers, received back after reprocessing, and ultimately used in the declared final products. Procedural non-compliance by itself is not decisive if documentary evidence such as invoices and job-work bills supports actual utilisation. The Tribunal therefore held that the substantive claim required proper verification of the material on record, set aside the impugned order, and remanded the matter for fresh decision.

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Issues: Whether Modvat credit could be denied merely because permission under Rule 57F(2) was not obtained, when the assessee claimed that the inputs were in fact used in the manufacture of the final product and evidence was available for verification.

Analysis: The dispute centred on non-compliance with the procedural requirement of obtaining permission for sending inputs to job workers. The Tribunal held that such procedural omission by itself would not justify denial of Modvat credit if the assessee could establish from the records that the inputs were received back after reprocessing and were ultimately used in the declared finished products. The lower authorities had not properly examined the documentary material relied upon by the assessee, including invoices and job-work bills, to verify actual utilisation of the inputs.

Conclusion: Modvat credit could not be rejected solely for failure to obtain permission under Rule 57F(2), and the matter had to be re-examined to verify substantive use of the inputs; the impugned order was set aside and the case was remanded for de novo decision.

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