Modvat credit cannot be denied for procedural lapse when duty-paid inputs are later covered by the relevant gate pass.

Modvat credit could not be denied merely because inputs were received in instalments under challans before the relevant gate pass arrived, where the goods were duty paid, entered in statutory records, and credit was taken only after receipt of the gate pass. The absence of subsidiary gate passes was treated as a procedural lapse because the scheme permitted them for smaller consignments covered by a larger gate pass. Credit on the remaining inputs was therefore admissible, and denial of credit was not sustained.

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Issues: Whether Modvat credit could be denied on inputs received in instalments under challans when the relevant gate pass covering the entire quantity was received later and the omission to obtain subsidiary gate passes was only procedural.

Analysis: The inputs covered by the gate pass were admittedly received and entered in the statutory records. The only objection was that two instalments had not been accompanied by the gate pass at the time of receipt. The Tribunal noted that the scheme permitted issue of subsidiary gate passes for smaller consignments covered by a larger gate pass. Since the credit was taken only when the gate pass was received and the inputs were duty paid, the lapse was treated as a procedural one and not as a denial of the substantive entitlement.

Conclusion: Modvat credit on the remaining inputs was admissible and the denial of credit was not sustained.

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