Modvat credit for transit-diverted consignments is allowed when endorsed by the jurisdictional excise authority under binding circulars.

Modvat credit cannot be denied where consignments are diverted in transit to a different consignee with the jurisdictional Superintendent's written endorsement and in line with binding departmental circulars. The circulars recognised transit sale and allowed invoice endorsement for the revised consignee, and the same procedure applied where manufacturers issued invoices. On these facts, the original invoice being in another concern's name was only a technical objection and did not justify disallowance of credit.

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Issues: Whether Modvat credit could be denied when goods were diverted in transit to a different consignee with the permission of the jurisdictional Superintendent and in terms of the Board's circulars.

Analysis: The inputs were originally consigned to one registered person but were redirected during transit to the appellant after a written request and an endorsement by the jurisdictional Superintendent. The Board's Circular No. 96/7/95-CX. dated 13-2-95 recognised transit sale and prescribed that, where goods are diverted to a new destination on request, the Superintendent may endorse the invoices for the revised consignee. Circular No. 207/11/96-CX. dated 1-5-96 clarified that the same guidelines apply where manufacturers issue invoices. Since the diversion was permitted by the competent authority and the procedure contemplated by the circulars was followed, the credit could not be disallowed merely because the original invoices stood in another concern's name.

Conclusion: The denial of Modvat credit was unsustainable, and the assessee was entitled to the credit.

Final Conclusion: The appeal succeeded and the impugned order disallowing credit and imposing penalties was set aside.

Ratio Decidendi: Where transit diversion of consignments is authorised by the jurisdictional excise authority and is in accordance with binding departmental circulars, Modvat credit cannot be denied on a purely technical objection as to the name in the original invoice.

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