Modvat credit on imported capital goods remained valid despite an EPCG licence initially standing in another unit's name.

Modvat credit on imported capital goods was not liable to reversal where Unit No. 1 ordered the goods, filed the Bills of Entry and duty payment in its name, received and installed the goods in its premises, and filed the Rule 57T declaration. The only objection was that the EPCG licence initially stood in the name of another unit, but the Tribunal treated that as a procedural issue that did not defeat credit entitlement on these facts. It also noted that the later DGFT regularisation of the import for Unit No. 1 removed the alleged licence defect, which could not justify reversal of credit under central excise law or sustain penalties.

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Issues: Whether Modvat credit on imported capital goods was liable to reversal, and penalties were sustainable, merely because the EPCG licence stood in the name of another unit when the goods were ordered, imported, duty-paid, declared and installed by Unit No. 1.

Analysis: The capital goods were ordered by Unit No. 1, the Bills of Entry and duty payment were in its name, the goods were received and installed in its premises, and the declaration under Rule 57T(1) was filed by that unit. The only objection was that the EPCG licence originally stood in the name of Unit No. 2. The Tribunal held that, so far as Modvat entitlement was concerned, the relevant procedural requirements had been satisfied by Unit No. 1 and the taking of credit could not be treated as irregular on these facts. It further noted that the DGFT had subsequently regularised the import for installation in Unit No. 1, and that any issue arising from the import licence belonged to the customs side rather than furnishing a basis for reversal of credit under central excise law.

Conclusion: The reversal of Modvat credit and the connected penalties were unsustainable, and the credit was held to have been rightly taken by the assessee.

Ratio Decidendi: Where duty-paid capital goods are imported, declared, received and installed by the same unit that takes Modvat credit, subsequent regularisation of the EPCG import removes the alleged defect in the licence and does not justify reversal of credit under central excise law.

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