1997 (10) TMI 242 - AT - Central Excise

Appellate Tribunal rules on Modvat credit denial for non-compliant goods movement

The Appellate Tribunal CEGAT, Madras ruled against granting Modvat credit benefit for goods received under endorsed invoices post-30-6-1994. The Tribunal ... Modvat - Duty paying document Issues:- Benefit of Modvat credit in respect of goods received under endorsed invoice after 30-6-1994.Analysis:The appeal before the Appellate Tribunal CEGAT, Madras centered around the benefit of Modvat credit for goods received under endorsed invoices post-30-6-1994. The lower appellate authority had granted the Modvat credit benefit, citing the verifiable duty paying nature of the goods. However, the Revenue challenged this decision, contending that there was no provision in the rules permitting Modvat credit under endorsed invoices.The department argued that the goods were initially received at a unit and later transferred to another unit within the same organization under the cover of the original invoice by endorsing it. They emphasized that the proper procedure would have been to issue a fresh invoice for the transfer or reverse the Modvat credit taken under Rule 57F(ii) to comply with Modvat Rules. They asserted that moving goods under endorsed invoices was not provided for in the rules, potentially prejudicing the Revenue's interest by hindering the verification of the duty paying nature of the goods.In response, the respondents' consultant defended their practice of transferring goods between units using endorsed invoices, claiming that denying Modvat credit would deprive them of the statutory benefit conferred. However, the Tribunal analyzed the situation and highlighted that under Rule 57A, the original invoice ceased to be valid once the goods reached their destination. The rules mandated following Rule 57F for goods movement between units, requiring a fresh invoice to prevent prejudice to the Revenue's interest. Since the respondents did not issue a fresh invoice and failed to comply with Rule 57F(ii) procedure, the Tribunal concluded that they were not entitled to the Modvat credit benefit. The Tribunal stressed the importance of complying with excise laws for the movement of goods under valid documents, indicating that procedural violations could not be overlooked even under a beneficial legislation. Consequently, the Tribunal allowed the Revenue's appeal, ruling against granting the Modvat credit benefit to the respondents.