Modvat credit for pre-declaration inputs upheld where stock and use were established, and packing material was already declared.

Modvat credit under Rule 57H was treated as admissible for inputs received before filing the declaration where the relevant stock position and use in dutiable final products were established. The Tribunal noted that formal permission had in fact been granted, making the assessee's case stronger than situations where credit is claimed without prior approval. It also held that bottles could not be excluded merely because they were part of packing material, since they had already been covered in the assessee's declarations and the Modvat scheme does not require a one-to-one input-output correlation. On that basis, denial of credit was held unsustainable and the credit was restored.

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Issues: Whether Modvat credit was admissible under Rule 57H of the Central Excise Rules, 1944 for inputs received before filing the declaration, and whether credit on bottles was liable to be denied when such packing material had already been covered by the declarations filed by the assessee.

Analysis: The Tribunal applied the settled view that credit taken on inputs received before filing the Rule 57H application cannot be denied merely because prior permission was not obtained, provided the stock position on the relevant date and use of the inputs in dutiable final products are established. It noted that, in the present case, formal permission had in fact been granted under Rule 57H and the assessee's position was stronger than cases where credit had been taken without such permission. The Tribunal also found that bottles forming part of the disputed amount had already been included in the assessee's earlier and later declarations, and there is no requirement under the Modvat scheme of a one-to-one input-output correlation.

Conclusion: The denial of Modvat credit was not sustainable, and the assessee was entitled to restore the credit of Rs. 2,11,564/-.

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