Strict Modvat endorsement compliance barred credit where gate pass traceability requirements were not satisfied.

Modvat credit was treated as subject to strict compliance with Rule 57G, and the endorsement procedure on the gate pass was regarded as mandatory to preserve statutory traceability under excise law. The Tribunal considered the two units to be separate entities for Central Excise purposes and found no basis to relax the prescribed endorsement requirement where the gate pass carried more than two endorsements, including one made by one unit in favour of another unit of the same assessee. On those facts, the credit was held not admissible.

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Issues: Whether Modvat credit could be taken where the gate pass had more than two endorsements and one endorsement was made by one unit in favour of another unit of the same assessee.

Analysis: Rule 57G prescribed the formal requirements for availing Modvat credit, and those requirements were treated as mandatory. The endorsement mechanism was intended to satisfy the statutory traceability requirements under the excise law. The Tribunal held that for the purpose of Central Excise law the two units were separate entities, and the facts did not justify relaxing the prescribed endorsement procedure. The earlier view taken in the cited precedent was not followed in preference to the later reasoning that treated the statutory formality as essential.

Conclusion: The credit was not admissible on the facts, and the departmental appeal succeeded.

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