Modvat credit cannot be denied for a procedural lapse when inputs and manufacturing process remain unchanged.

Modvat credit could not be denied merely because no fresh declaration was filed under Rule 57G when the final product was shifted from electric motors to stators and rotors, since the inputs, manufacturing process and duty-paid input nexus remained unchanged. The declaration had already disclosed the manufacturing activity and relevant inputs, and the department was aware of the arrangement. On these facts, the omission was only a procedural lapse and did not affect substantive entitlement to credit. A hyper-technical objection was held insufficient to defeat the Modvat scheme, and the denial of credit was set aside.

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Issues: Whether Modvat credit could be denied for failure to file a fresh declaration under Rule 57G when the final product was shifted by the department from electric motors to stators and rotors, although the inputs and manufacturing process remained the same.

Analysis: The declaration had already disclosed the manufacturing activity and the relevant inputs. The basic inputs continued to be stamping wires, there was no change in the tariff heading or in the nature of the inputs, and the duty-paid input remained the same despite the shifting of the final stage of production. The omission to file a fresh declaration for the intervening period was, on the facts, only a procedural lapse and not a circumstance affecting entitlement to credit. Modvat credit is meant to follow eligible duty-paid inputs, and a hyper-technical objection should not defeat the substantive scheme where the department was already aware of the manufacturing arrangement.

Conclusion: Denial of Modvat credit was not justified, and the assessee was entitled to the credit.

Final Conclusion: The appeal was allowed and the order denying Modvat credit was set aside on the footing that a procedural defect could not defeat the substantive benefit of credit.

Ratio Decidendi: A fresh declaration should not be insisted upon to deny Modvat credit where the eligible inputs, manufacturing process, and duty-paying nexus remain unchanged, and the defect is only procedural.

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