MODVAT credit rectification allowed where short credit was later made good before assessment, with no Rule 57B bar

Higher notional MODVAT credit on inputs received from a small scale unit was admissible where the assessee initially took only the lower gate-pass credit by mistake and later claimed the differential amount within four days, before RT-12 assessment, with the error reflected in the records. In the absence of any specific bar in Rule 57B against rectifying such a short credit, the later availing of the additional admissible credit was permitted. The denial of the differential MODVAT credit was therefore unsustainable, and the assessee was entitled to the higher notional credit.

---

---

Issues: Whether higher notional MODVAT credit, otherwise admissible on inputs received from a small scale unit, could be taken a few days later when the assessee had initially taken only the lower gate-pass credit.

Analysis: The inputs were received from a small scale unit enjoying exemption under Notification No. 175/86, and higher notional credit was admissible. The initial credit was taken on the lower side by mistake, and the differential credit was taken within four days, before RT-12 assessment, with the mistake reflected in the return records. In the absence of any specific bar in Rule 57B against subsequent rectification of such an error, the later availing of the additional admissible credit could not be denied. The reasoning was supported by the view that short credit, once discovered, may be made good at a later date.

Conclusion: The assessee was entitled to the higher notional credit, and the denial of the differential MODVAT credit was unsustainable.

---