Transitional Modvat credit on endorsed invoices was accepted where documentation changed from gate passes to invoices.

Transitional Modvat credit was treated as permissible where inputs were received under an endorsed invoice during the switch from the gate pass system to the invoice system. The commentary notes that relaxation notifications issued during the transition were read as easing documentary requirements, and that endorsed gate passes valid before 1-4-1994 were accepted up to 30-6-1994 on the same rationale. The same principle was extended to invoices replacing gate passes, with entitlement subject to verification that only one invoice had been issued and that the goods were sent in original packing on job work basis.

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Issues: Whether Modvat credit could be allowed on inputs received under an endorsed invoice during the transitional period after the shift from the gate pass system to the invoice system.

Analysis: The Tribunal held that the changeover from the gate pass regime to the invoice regime had created transitional difficulty in documentation and that notifications issued in that period relaxed the documentary requirements. It treated endorsed gate passes that were acceptable before 1-4-1994 as a valid basis for credit up to 30-6-1994 and applied the same principle to invoices, since invoices had replaced gate passes. The Tribunal also noted that the goods had been manufactured on job work basis and were sent in original packing, and that the entitlement would stand subject to verification that only one set of invoice had been issued.

Conclusion: Modvat credit on the endorsed invoice was permissible on the facts, and the Revenue's appeal failed.

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