Modvat credit on capital goods cannot be denied for delayed intimation or a separate pending-appeal account.

Modvat credit on capital goods could not be denied merely because intimation of receipt was delayed, where that delay had been condoned under the Central Excise Rules and the declarations were duly filed with acknowledgements. A later formal acknowledgement was treated as relating back to the filing date, and the department itself recorded that credit was not to be refused on that ground. Maintaining a separate RG-23C account during pending appeals, with notice to the range officer, was only a protective step to preserve the credit position and did not show mala fides or justify denial of credit. The credit claim was therefore sustainable.

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Issues: Whether Modvat credit on capital goods could be denied for delay in intimation, want of contemporaneous dated acknowledgement, and maintenance of a separate RG-23C account during the pendency of appeals.

Analysis: The declarations had been filed and dated acknowledgements had been obtained, and a subsequent formal acknowledgement related back to the date of filing. The delay in intimating receipt of capital goods had been condoned under Rule 57T(5) of the Central Excise Rules, 1944, and the departmental letter itself recorded that credit could not be denied on that ground. The maintenance of a separate register during pending disputes was only to preserve the credit position if the appeals succeeded and, with due intimation to the range officer, did not establish any mala fide or justify denial of credit.

Conclusion: The denial of Modvat credit was not sustainable, and the assessee was entitled to the credit.

Ratio Decidendi: Where delay in filing intimation is condoned and the declarations are duly filed, Modvat credit on capital goods cannot be denied merely because the assessee maintained a separate account pending appellate determination of eligibility.

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