Endorsed Bills of Entry can support Modvat credit when imported goods are properly diverted to the manufacturing unit.

Modvat credit on imported inputs was held admissible where the duty-paid Bill of Entry was validly endorsed for diversion to the manufacturing unit under the Customs endorsement procedure. The Tribunal applied Rule 57AE of the Central Excise Rules, 1944, together with Board circulars governing transfer of goods while in the Customs dock area, and followed its earlier view that credit cannot be denied merely because the Bill of Entry was not originally filed in the unit's name. The disallowance and penalty were set aside.

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Issues: Whether Modvat credit of duty paid on inputs could be availed on the strength of endorsed Bills of Entry.

Analysis: The dispute turned on whether an endorsed Bill of Entry was a permissible duty paying document for credit purposes under Rule 57AE of the Central Excise Rules, 1944. The Tribunal relied on the Board's circulars governing diversion or transfer of imported goods while they were still in Customs dock area and the endorsement procedure by the proper officer of Customs. It followed its earlier decision on the same point and applied the view that where imported goods are validly diverted to the manufacturing unit with proper Customs endorsement, credit cannot be denied merely because the Bill of Entry was not originally filed in the name of that unit.

Conclusion: Modvat credit was allowable on the strength of the endorsed Bills of Entry, and the disallowance and penalty were set aside in favour of the assessee.

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