MODVAT credit on stock inputs may be available, but final sanction depends on proper verification of records and stock position.

MODVAT credit on inputs lying in stock could be available even without prior written approval, but sanction depended on verification of the declared inputs and supporting records. The assessee had filed the declaration under Rule 57G and sought credit under Rule 57H, and was treated as eligible in principle. However, the record did not satisfactorily establish the quantity and eligibility of the inputs actually lying in the factory. The matter therefore required re-examination by the departmental authority, and credit was to be granted only to the extent that the stock and records were properly proved.

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Issues: Whether MODVAT credit on inputs lying in stock could be availed before written approval under the relevant MODVAT procedure, and whether the matter required verification by the Assistant Collector before final sanction.

Analysis: The appellants had filed the declaration under Rule 57G and simultaneously moved an application under Rule 57H for credit on inputs lying in stock. The record showed that the inputs were declared and the assessee was otherwise eligible for credit, but the material before the Tribunal did not satisfactorily establish proper verification of the quantity and eligibility of the inputs actually lying in the factory. Since entitlement depended upon verification of the records and the stock position, the issue could not be finally concluded without re-examination by the departmental authority.

Conclusion: The assessee was held eligible for MODVAT credit in principle, but the Assistant Collector was directed to re-examine the records and sanction credit only to the extent of inputs satisfactorily proved to have been lying in stock.

Ratio Decidendi: Eligibility to MODVAT credit may subsist notwithstanding absence of prior written approval, but sanction of credit on stock inputs is subject to proper verification of the declared inputs and supporting records.

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