Modvat credit for stock on 1-4-1994 may be allowed despite delayed declaration, subject to document verification.

Modvat credit on inputs lying in stock on 1-4-1994 was treated as admissible where the Rule 57H declaration was filed later, provided the eligible inputs and supporting stock records and gate passes were verified. Premature taking of credit was not, by itself, a ground to deny the substantive benefit when the scheme permitted condonation of delay and the inputs were shown to have been used in manufacture of dutiable final products. The denial was set aside and the matter remanded for fresh examination of the original Form IV account, gate passes and connected documents; if acceptable, the credit was to be allowed.

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Issues: Whether Modvat credit on inputs lying in stock on 1-4-1994 could be allowed where the declaration under Rule 57H was filed later and the credit had been taken before the declaration, subject to verification of the stock records and gate passes.

Analysis: The Form IV account produced before the Tribunal showed the stock position as on 1-4-1994 and contained particulars of the gate passes. The scheme then in force permitted condonation of delay in filing the Modvat declaration, and the premature taking of credit did not by itself justify denial of the substantive benefit if the existence of eligible inputs on the relevant date and their use in the manufacture of dutiable final products was established. Since the original records had not been properly verified by the lower authorities, fresh examination of the documents was required.

Conclusion: The denial of Modvat credit was set aside and the matter was remanded for verification of the original Form IV account, gate passes and connected documents. If the documents are found acceptable, the credit on inputs lying on 1-4-1994 is to be allowed.

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