Modvat credit and gate pass endorsements: internal transfer to the factory was not a third endorsement, so credit stood.

For Modvat purposes, an internal transfer of a gate pass from an assessee's head office to its own factory does not amount to a fresh endorsement. The record showed only two endorsements on the gate pass: one from the original manufacturer's godown to an intermediary, and a second from that intermediary to the assessee's head office. The movement from the head office to the factory was treated as an internal transfer within the same entity, not a third endorsement. On that basis, credit could not be denied on the ground that the gate pass had been endorsed more than twice.

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Issues: Whether Modvat credit was admissible when the gate pass was endorsed only twice, and whether the internal endorsement from the assessee's head office to its factory amounted to a third endorsement so as to deny credit.

Analysis: The dispute turned on the actual chain of endorsements on GP-1 No. 405 dated 2-7-91. The record showed one endorsement by the godown of the original manufacturer in favour of M/s. Hind Rubber and a second endorsement by M/s. Hind Rubber in favour of the assessee's head office. The subsequent movement from the head office to the assessee's factory was treated as an internal transfer within the same entity and not as a further endorsement for purposes of Modvat eligibility. On that factual footing, the question whether credit could be denied for a gate pass endorsed more than two times did not arise.

Conclusion: The gate pass was not endorsed three times, and the Modvat credit could not be denied on that basis. The Revenue appeal failed.

Final Conclusion: The assessee's entitlement to Modvat credit was upheld on the facts, and the departmental challenge was rejected.

Ratio Decidendi: For Modvat purposes, an internal transfer from the buyer's head office to its own factory does not constitute a fresh endorsement of the gate pass.

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