Modvat credit for pre-declaration inputs turns on proof of duty payment, not rigid document formality.

Modvat credit under Rule 57H could be available for inputs lying in stock before filing of declaration if the duty-paid character of the goods was established and the Assistant Collector was satisfied on that basis. Credit should not be refused merely because the documents in the assessee's possession did not fully satisfy the receipt-stage requirements, where an endorsed gate pass indicated duty-paid goods. The denial of credit was therefore unsustainable, and the matter required fresh examination by the lower authority after giving the assessee an opportunity of hearing.

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Issues: Whether Modvat credit could be allowed in respect of inputs lying in stock before the filing of declaration under Rule 57H when the goods were received under documents not fully satisfying the prescribed requirements under Rule 57G.

Analysis: Rule 57H permitted Modvat credit for inputs lying in stock prior to declaration, subject to satisfaction that the goods had suffered duty and that the Assistant Collector was satisfied on that aspect. The purpose of the scheme was to advance Modvat benefits where evidence of duty payment existed, and credit should not ordinarily be denied merely because the document in the assessee's hands did not fully meet the requirements applicable at the time of receipt. The existence of an endorsed gate pass indicating duty-paid goods was relevant and the lower authority ought to have examined the claim on that basis rather than rejecting it solely for non-compliance with the documentary requirements of Rule 57H.

Conclusion: The denial of Modvat credit was unsustainable and the matter required fresh examination by the lower authority after giving an opportunity of hearing to the assessee.

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