Modvat credit for procedural accounting lapse not denied where inputs were received and used in manufacture.

Modvat credit cannot be denied merely because the assessee failed to make timely entries in RG 23A Part II where the inputs were admittedly received and used in manufacture of the final product. The omission to record the goods properly was treated as a procedural lapse, not a substantive breach affecting eligibility to credit. Since the inputs were metal containers and their use in the final product was not disputed, the demand based solely on the accounting defect was unsustainable.

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Issues: Whether Modvat credit could be denied merely because the assessee failed to make proper entries in RG 23A Part II when the inputs were received and utilised in the manufacture of the final product.

Analysis: The Tribunal noted that the inputs in question were metal containers, that the assessee was otherwise entitled to Modvat credit, and that it was not disputed that the inputs had been used in the manufacture of the final product. In such circumstances, the omission to make proper accounting entries was treated as a procedural lapse rather than a substantive violation defeating credit eligibility. The order disallowing credit on the footing that Rule 57G(3) was mandatory was found unsustainable in light of the earlier Tribunal view recognising compliance where inputs and outputs were duly declared and the inputs were actually utilised.

Conclusion: Modvat credit could not be denied on the facts of the case, and the demand based solely on the accounting lapse was not sustainable.

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