1999 (1) TMI 122 - AT - Central Excise

Court allows appeals in favor of assessees on Modvat credit & penalties, recognizing Trade Notice guidelines for inter-unit transfers.

The appeals were allowed in favor of the assessees, overturning the reversal of Modvat credit and penalties imposed for receiving inputs under different ... Modvat - Endorsement of duty paying documents Issues:- Modvat credit scheme application for manufacturing units receiving inputs under different names- Validity of Trade Notice and Tribunal Judgments- Impact of rule changes post-1-4-1994 on invoice endorsements- Interpretation of judgments regarding transfer of goods between sister units- Commissioner's observation on rule amendments and inter-unit exchanges- Consumption of goods in factory vs. legal disputeAnalysis:The case involved multiple applications seeking stay for the same assessees and issue, ultimately leading to the disposal of the main appeals with mutual agreement. The assessees operated two manufacturing units under the Modvat credit scheme, facing Show Cause Notices for credit reversal and penalties due to receiving inputs under a different unit's name. The Assistant Commissioner and Commissioner (Appeals) upheld the reversal and penalties, prompting the appeals and applications.The appellant relied on a Trade Notice allowing the use of goods received under different names in the factory with appropriate endorsements, supported by a Tribunal Judgment emphasizing the continuity of Modvat credit for multi-unit companies. The respondent referenced post-1-4-1994 rule changes and judgments disallowing endorsed invoices for Modvat credit, distinguishing situations involving dealer dispatches from inter-unit transfers. Notably, a specific Tribunal Judgment and a subsequent single Member Bench decision reinforced the allowance of credit without endorsements in inter-unit transfers.The presiding judge considered the submissions, acknowledging the rule changes post-1-4-1994 affecting endorsements on invoices but emphasizing the applicability of judgments in cases of goods transfer between sister units. The judge highlighted the continued validity of the Trade Notice permitting endorsements in specific situations like the one at hand, where inter-unit exchanges remained unaffected by the rule changes impacting dealer invoices.The judge noted that despite the legal dispute, the goods were indeed received and consumed in the assessees' factory, leading to the allowance of the appeals, overturning the impugned orders, and granting consequential relief. Consequently, the stay applications were disposed of accordingly, bringing closure to the legal proceedings.