Endorsed invoices cannot support MODVAT or CENVAT credit after statutory changes, though penalty may be waived for bona fide dispute.

Endorsed invoices ceased to be valid duty paying documents for availing MODVAT or CENVAT credit after the relevant statutory changes, so credit taken on that basis was inadmissible and the denial of credit was upheld. Penalty was nevertheless set aside because the dispute had been shaped by conflicting decisions and later authoritative rulings, making the imposition of penalty unwarranted on the facts. The result was partial relief: the credit disallowance remained, but the penal consequence was removed.

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Issues: (i) Whether CENVAT credit was admissible on the basis of endorsed invoices after 01.09.1996; (ii) Whether penalty was sustainable in the facts of the case.

Issue (i): Whether CENVAT credit was admissible on the basis of endorsed invoices after 01.09.1996.

Analysis: The dispute concerned credit taken on endorsed duty paying documents. The applicable rule prescribed the documents on the basis of which credit could be availed, and the Tribunal relied on the settled position that after the relevant statutory changes endorsed invoices were not a valid basis for credit. The larger Bench view and the subsequent High Court approval were followed to hold that endorsement could not substitute the prescribed document for availing credit.

Conclusion: Credit on the strength of endorsed invoices was held inadmissible, and the denial of credit was upheld.

Issue (ii): Whether penalty was sustainable in the facts of the case.

Analysis: Although credit was denied, the Tribunal found that the controversy had been settled by conflicting decisions and later authoritative rulings, and on that basis considered the imposition of penalty unwarranted in the circumstances.

Conclusion: Penalty was set aside.

Final Conclusion: The order upholding denial of credit was maintained, but the penal consequence was removed, resulting in partial relief to the appellant.

Ratio Decidendi: After the prescribed statutory changes, endorsed invoices are not valid duty paying documents for availing MODVAT or CENVAT credit, though penalty may be waived where the dispute is covered by bona fide interpretive controversy.

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