Modvat credit on duty-paid inputs cannot be denied for consignee details or mistaken invoice endorsement when goods are actually used in manufacture.

Duty-paid inputs received directly from the manufacturer under Rule 52A invoices qualify for Modvat credit when they are in fact used in the manufacture of the final product. Naming the Railways' Inspector of Works in the consignee details did not defeat credit because the goods were intended for the assessee's factory and were actually consumed there. Credit on cement was also wrongly denied, as the manufacturer's own Calcutta office endorsed the invoices in favour of the assessee, so the transaction was not an impermissible intermediate endorsement. The denial of credit, demand, and penalty were unsustainable.

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Issues: Whether Modvat credit was admissible on inputs received directly from the manufacturer under invoices issued under Rule 52A of the Central Excise Rules, 1944, where the invoices were addressed to the Railways through the Inspector of Works and no separate endorsement by the Railways was made; and whether credit on cement was rightly denied when the manufacturer's own Calcutta office endorsed the Rule 52A invoices in favour of the assessee along with its own invoices.

Analysis: The inputs in question were admittedly received directly at the assessee's factory under invoices issued by the manufacturers under Rule 52A. The mention of the Inspector of Works as consignee did not alter the fact that the goods were meant for the assessee's factory and were used in the manufacture of the final product. Since the value of the inserts was included in the final product and the duty-paid inputs were actually used, the situation was not one of impermissible endorsement of invoices. On the cement invoices, the manufacturer's own Calcutta office endorsed the Rule 52A invoices in favour of the assessee, so the denial proceeded on an incorrect footing that the endorsement came from an intermediate receiver. The facts, therefore, made the cited larger bench ruling inapplicable.

Conclusion: Modvat credit was admissible, and the denial of credit and related demand and penalty were not sustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where duty-paid inputs are received directly from the manufacturer under Rule 52A invoices and are in fact used in the manufacture of the final product, Modvat credit cannot be denied merely because the invoices name the purchaser or its representative in the consignment details, and credit cannot be refused on a mistaken characterisation of the transaction as an improper endorsement of invoices.

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