2002 (2) TMI 1136 - AT - Central Excise

Issues:
1. Eligibility of Modvat credit for goods received prior to becoming eligible inputs.
2. Validity of endorsing gate passes for availing Modvat credit.
3. Denial of Modvat credit based on the timing of credit taken by different units.
4. Allegations and actions against Mumbai and Jamnagar units in the show cause notice.

Issue 1: Eligibility of Modvat credit for goods received prior to becoming eligible inputs:
The case involved M/s. Bombay Dying & Mfg. Co. Ltd. purchasing goods before they were considered eligible inputs under Rule 57A. The Mumbai unit took credit when the goods became eligible, but the Jamnagar unit received the goods after they were eligible. The issue was whether the credit taken by the Jamnagar unit was admissible. The Asstt. Commissioner and Commissioner (A) denied the credit, citing the goods being received beyond the allowable period. However, the Tribunal found that the Mumbai unit did not contravene any provision by endorsing gate passes, and the show cause notice did not properly allege any wrongdoing by the Mumbai unit. Therefore, the denial of Modvat credit on these grounds was not upheld.

Issue 2: Validity of endorsing gate passes for availing Modvat credit:
The Asstt. Commissioner denied the credit on endorsed gate passes post-April 1994, claiming no provision for such endorsements. However, the Tribunal noted that gate passes issued before April 1994 could be endorsed later, supported by case law. The Mumbai unit did not take credit for these passes, and the endorsement was a routine activity permitted by the Department. The Tribunal found no wrongdoing by the Mumbai unit in making the endorsements, and the denial of credit based on this ground was deemed incorrect.

Issue 3: Denial of Modvat credit based on the timing of credit taken by different units:
The Mumbai unit had taken credit for goods with a significant gap between receipt and eligibility under Rule 57H. The Tribunal acknowledged this as improper but stated it should not affect the credit taken by the Jamnagar unit. The responsibility to deny credit lay with the Mumbai unit, and any denial would impact the Jamnagar unit's credit. However, reversing Jamnagar unit's credit based on Mumbai unit's actions was deemed inappropriate, as the show cause notice did not implicate the Mumbai unit directly.

Issue 4: Allegations and actions against Mumbai and Jamnagar units in the show cause notice:
The show cause notice alleged the Jamnagar unit's inadmissible credit based on the timing of credit taken and the Mumbai unit's scheme. However, the notice did not target the Mumbai unit specifically, and no separate allegations were made against them. The Tribunal found the lack of proper allegations against the Mumbai unit and the absence of them as noticees significant. The Commissioner's characterization of the operation as devious was noted, but without proper allegations, the denial of Modvat credit was deemed legally incorrect.

In conclusion, the appeal succeeded, and relief was granted in accordance with the law.

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