2010 (2) TMI 608 - HC - Central Excise

High Court affirms Tribunal decision on Modvat credit eligibility emphasizing documentation & endorsements

The High Court upheld the Tribunal's decision in favor of the respondent regarding Modvat credit entitlement on capital goods. The Court emphasized that ... Modvat / Cenvat Credit – ownership – endorsement on bill of entry Capital goods were imported by M/s. Frito Lay India and received by the assessee. The assessee availed MODVAT credit on these goods. Department objected on the basis that the assessee was not the owner. – Held that: - Tribunal was correct in allowing the Modvat credit on the capital goods received by the respondent particularly when the endorsement in the Bill of Entry was made in its favour by M/s. Frito Lay India. Accordingly, both the questions of law are answered in favour of the assessee and against the Revenue Issues:- Modvat credit entitlement on capital goods received but not acquired by the party.- Validity of endorsement in the Bill of Entry in favor of the respondent.Analysis:Issue 1: Modvat Credit EntitlementThe High Court dealt with the issue of whether the Tribunal correctly allowed Modvat credit on capital goods received by the respondent, even though the goods were not acquired by them. The Revenue contended that the Bill of Entry and Invoices were in the name of a different entity, leading to objections and potential penalties. However, the respondent argued that ownership of goods is not a criterion for denying Modvat credit, citing precedents such as Sharda Motors Industries Ltd. v. CCE, Chennai, and His Automotives Ltd. v. CCE, Chennai, supported by a Circular of the Board dated 1-3-1999. The Court analyzed the facts, noting that although the capital goods were imported by another entity, the endorsement in the Bill of Entry was in favor of the respondent. Relying on the precedent set by Sharda Motors' case, the Court upheld that ownership is not a decisive factor for Modvat credit eligibility. Consequently, the Court held in favor of the respondent, allowing the Modvat credit on the capital goods received.Issue 2: Validity of Endorsement in Bill of EntryThe second issue revolved around the validity of the endorsement in the Bill of Entry in favor of the respondent. The Court examined the specifics of the case, emphasizing that the endorsement by the importing entity in favor of the respondent was a crucial factor. Citing the precedent and Circular mentioned earlier, the Court concluded that since the Bill of Entry was made out in favor of the respondent, the Modvat credit could not be denied. By aligning with the Tribunal's decision, the Court found that the endorsement in the Bill of Entry played a pivotal role in determining the entitlement to Modvat credit. Consequently, both questions of law were answered in favor of the respondent, and the Tribunal's order was upheld, leading to the dismissal of the appeal by the Revenue.In conclusion, the High Court's judgment clarified the principles governing Modvat credit entitlement on capital goods and underscored the significance of the endorsement in the Bill of Entry in determining eligibility. The decision reaffirmed that ownership is not the sole criterion for claiming Modvat credit, emphasizing the importance of specific documentation and endorsements in establishing entitlement.