Modvat credit verification under Rule 57H may include physical stock checks; unraised Tribunal pleas cannot create a question of law.

Rule 57H permits Modvat credit only after the authority is satisfied that the claimed inputs are properly verified, and physical verification of stock is a legitimate method for that cross-check where it serves revenue protection without undue hardship to the assessee. The insistence on physical verification was treated as rational on the facts, so denial of credit was upheld. A further plea based on Rule 57G was not entertained because it had not been urged before the Tribunal, and no question of law could arise from a contention not raised at that stage. The reference application was therefore rejected.

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Issues: Whether Modvat credit under Rule 57H of the Central Excise Rules, 1944 could be denied for want of verification of the inputs in stock and whether a question of law arose on a plea not urged before the Tribunal.

Analysis: Rule 57H operates as an exception to the general scheme of Modvat credit under Rule 57G and must be applied in a practical manner so that revenue interest is protected while undue hardship to the assessee is avoided. The verification contemplated under Rule 57H is meant to enable a cross-check between the inputs claimed and the supporting documents, and physical verification of stock is a permissible method for forming the required satisfaction. The authorities' insistence on physical verification was held to be based on rational criteria. The plea founded on Rule 57G was rejected because it had not been urged before the Tribunal and, therefore, no corresponding question of law could be said to arise from the order.

Conclusion: Denial of Modvat credit on the facts was upheld and the reference application was rejected.

Ratio Decidendi: A plea not raised before the Tribunal cannot form the basis of a question of law in reference proceedings, and under Rule 57H verification of inputs may legitimately include physical verification to enable the authority to reach a rational satisfaction.

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