1996 (6) TMI 305 - AT - Central Excise

Summary

Issues: Interpretation of notification under Rule 57G for Modvat credit on inputs received under GPs issued before 1-4-94.

Analysis:
1. The appeal challenged the denial of Modvat credit by the C.C.E. (Appeals) regarding inputs received under GPs issued before 1-4-94 but received in July & August, 94. The denial was based on the amendment to Rule 57G and Notification No. 16/94, prescribing the invoice as the valid document for Modvat credit after 30-6-94.

2. The issue involved the interpretation of the notification under Rule 57G. The matter was referred to a two-member bench due to the complexity of the issue. The appellant argued that the change from GPs to invoices should not affect Modvat credit eligibility for inputs cleared under valid GPs issued before 1-4-94.

3. The appellant contended that GPs issued earlier should continue to be accepted for Modvat credit, despite the amendment to Rule 57G prescribing invoices. The appellant cited the simplification of central excise procedures and referred to legal precedents to support the argument that restricting the validity of GPs for Modvat credit was arbitrary and unreasonable.

4. The respondent argued that the change in the statute prescribed the invoice as the legal document for clearance of goods, thereby making it the document for Modvat credit under Rule 57G.

5. The Tribunal analyzed the relevant rules governing Modvat credit and observed that Modvat credit was allowed under Rule 57A, subject to specific provisions like Rule 57H(2). The Tribunal noted that the change from GPs to invoices was a procedural simplification, but it did not automatically invalidate GPs issued before 1-4-94 for Modvat credit purposes.

6. The Tribunal emphasized that the purpose of Modvat credit was to avoid duty cascading and that GPs were valid documents for goods clearance before the amendment. The Tribunal questioned the authority of restricting the period for taking Modvat credit on GPs issued before 1-4-94, as Rule 57G did not empower such restrictions.

7. Relying on the legal precedent cited by the appellant, the Tribunal held that the appellants were entitled to Modvat credit for inputs received under GPs issued before 1-4-94. The Tribunal ordered in favor of the appellant, emphasizing the validity of GPs as legal documents for Modvat credit before the prescribed change to invoices.