2002 (4) TMI 686 - AT - Central Excise

Summary

Issues:
1. Availing Modvat credit on inputs under Rule 57A of Central Excise Rules, 1944.
2. Allegation of endorsing gate pass more than two times.
3. Disallowance of Modvat credit and imposition of penalty.
4. Review of Assistant Commissioner's order by Commissioner (Appeals).
5. Contention regarding the number of endorsements on gate pass.
6. Interpretation of different tribunal decisions on Modvat credit eligibility.

Analysis:
1. The respondents availed Modvat credit on inputs under Rule 57A of Central Excise Rules, 1944. A show cause notice was issued alleging that they endorsed a gate pass more than two times, specifically on GP-1 No. 405 dated 2-7-91. The Assistant Commissioner initiated proceedings, but upon considering the reply, dropped the case.

2. The Assistant Commissioner's decision was reviewed, and the department appealed to the Commissioner (Appeals), Bhopal. The Commissioner rejected the appeal, upholding the Assistant Commissioner's order, leading to a Revenue appeal against this decision.

3. The Revenue contended that allowing Modvat credit based on a thrice endorsed gate pass was incorrect, citing a CEGAT decision and a CBEC circular advising against such practice. They also referenced a tribunal decision emphasizing compliance with mandatory provisions of two endorsements for Modvat credit eligibility.

4. During the appeal, the arguments presented highlighted conflicting tribunal decisions on the admissibility of Modvat credit on gate passes with more than two endorsements. However, in this specific case, it was noted that the gate pass was endorsed only twice, not thrice as previously perceived.

5. The gate pass in question was initially issued by M/s. IPCL to M/s. Hind Rubber, then to the respondents' head office, and finally to their factory at Betul. The endorsement from the head office to the factory was not considered a separate endorsement for Modvat credit purposes, as the credit should have been available at the factory even without this additional endorsement.

6. Considering the facts presented, the tribunal dismissed the Revenue's appeal, emphasizing that the gate pass was endorsed only twice, making the appeal misplaced. The decision highlighted the specific circumstances of this case and clarified the interpretation of the endorsements for Modvat credit eligibility.