Modvat credit on outside-godown inputs was upheld where delayed entry followed permitted storage and full receipt conditions.

Modvat credit could not be denied merely because the RG-23A, Part II entry was made after six months when inputs were stored in an outside godown with departmental permission. The relevant factor was that the inputs were received within the prescribed period from the invoice date, and the delay in book entry arose only because credit was to be taken after the full consignment was brought into the manufacturing premises. A Board circular on identical facts treated the outside premises as an extension of the factory and allowed credit only on receipt of the entire consignment inside the factory. In these circumstances, denial of credit was unsustainable and relief was due to the assessee.

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Issues: Whether Modvat credit could be denied merely because entry in RG-23A, Part II was made after six months, where the inputs were stored in an outside godown with departmental permission and the Board had issued a clarificatory circular on identical facts.

Analysis: The permission to store inputs outside the factory was granted subject to taking credit only after the entire consignment was brought into the manufacturing premises. The inputs were received within the relevant period from the date of invoice, and the delay was only in making the book entry because of the permitted outside storage. The Board's circular on identical circumstances clarified that the outside premises should be treated as an extension of the factory and that credit could be taken only when the full consignment covered by the invoice was received inside the factory. Once that clarification existed, the Revenue could not contend to the contrary.

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

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