Modvat credit on rejected goods turned on proof of Rule 57G declaration, leading to remand for verification.

Modvat credit on rejected goods received back as inputs depended on proof that the rejected material had been declared under Rule 57G. The lower authorities had denied credit on the view that the goods were the assessee's final product and could not again qualify for credit, but the Tribunal found the factual basis incomplete because the record did not show whether, or when, any Rule 57G declaration had been filed. The matter was remanded for fresh decision after verification of the declaration and hearing the assessee.

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Issues: Whether Modvat credit was admissible on rejected goods received back and treated as inputs, and whether the claim could be decided without verifying the declaration under Rule 57G.

Analysis: The lower authorities had denied credit on the footing that the rejected goods were the appellant's final product and that credit could not again be taken on the same goods. The Tribunal noted that the appellant relied on decisions supporting admissibility of credit where the rejected goods were declared as inputs under Rule 57G. However, the record did not show the date or production of any such declaration, and the factual foundation required for deciding entitlement was therefore incomplete.

Conclusion: The matter required verification of whether a Modvat declaration under Rule 57G had been filed showing the rejected material as input, and the case was remanded for fresh decision after hearing the appellant.

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