Modvat credit on capital goods was upheld where the loan-date declaration requirement was met after rescission of the exclusion.

Modvat credit on fabricated capital goods was held admissible where the goods were manufactured for the assessee's own use, duty had been paid, and the declaration under Rule 57T(4) had been filed before the loan transaction. The earlier exclusion for loan, lease or hire purchase had been rescinded by notifications issued on 17 June 1994, so the relevant test was the date of loan rather than the date of duty payment. A fresh declaration filed within three months of the loan was treated as sufficient, and the finding that the adjudicating authority had gone beyond the show cause notice was left undisturbed.

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Issues: Whether Modvat credit on fabricated capital goods was admissible where the declaration was initially filed before the goods were taken on loan and a fresh declaration was filed within three months from the date of loan.

Analysis: The goods were manufactured in the assessee's factory for its own use, duty was paid, and the declaration under Rule 57T(4) was filed before the loan transaction. The earlier exclusion relating to loan, lease or hire purchase stood rescinded by the notifications issued on 17.06.1994. The relevant date for testing the declaration was therefore the date of loan, not the date of duty payment, and the subsequent declaration was within three months. The appellate finding that the adjudicating authority had travelled beyond the show cause notice was also left undisturbed.

Conclusion: Modvat credit was admissible and the department's appeal failed.

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