Modvat credit on endorsed gate passes remained valid where the circular's conditions were met despite endorsement after 1-4-1994.

Modvat credit could not be denied merely because gate passes were endorsed after 1-4-1994, where the passes had originally been issued before that date and the governing circular continued to recognise such documents. The circular, read in light of the Gujarat High Court ruling, treated pre-1-4-1994 gate passes as valid for credit if the prescribed conditions were met, including that credit was taken on or before 30-6-1994. As those conditions were satisfied on the facts, the earlier disallowance could not stand and the assessee was entitled to credit.

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Issues: Whether Modvat credit could be denied on goods covered by gate passes originally issued before 1-4-1994 but endorsed in favour of the assessee after that date, in view of the departmental circular governing endorsed gate passes.

Analysis: The credit was denied on the ground that the facility of endorsed gate passes had been discontinued. However, the controlling circular, issued after the relevant dispute and in the light of the Gujarat High Court ruling, recognised that gate passes issued before 1-4-1994 but endorsed thereafter would remain valid documents for availing credit, provided the credit was taken on or before 30-6-1994. On the facts, the conditions of the circular were satisfied, and the earlier denial did not survive.

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

Final Conclusion: The order disallowing credit was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Where the governing circular validates pre-1-4-1994 gate passes endorsed after that date, credit cannot be denied if the prescribed conditions for such credit are fulfilled.

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