2014 (9) TMI 617 - HC - Central Excise

Denial of Modvat / CENVAT Credit - Endorsement of invoice - transfer of goods in transit - Invoices not in the name of manufacturer - Held that - Thus, the goods were transferred to the respondent-assessee by the first purchaser in transit by making an endorsement on the invoices received by him, which was the document of title in the goods and is a normal mode of transacting the goods in transit. It is also not in dispute that the subsequent purchasers of the inputs using the same in the manufacturer of goods can avail the Modvat credit and it need not be availed by purchaser at the fist instance, as the first purchaser need not be a manufacturer by himself. That is even clear from reading of Rule 57G, which was in force at the relevant time. There is no dispute about the fact that the assessee has furnished the declaration required by him under subrule (1) of Rule 57G of Central Excise Rules. Endorsed invoices issued by the manufacturer evidence payment of duty on such inputs. Therefore, the only controversy, which emanates from combined reading of the order of the Assessing Officer namely; Assistant Commissioner, Central Excise, goes to show that the impediment felt by the revenue in allowing the respondent assessee to avail the Modvat credit was about the first dealer having sold the goods in transit by endorsing invoices before or without receiving the goods at its premises, before issuing invoices in favour of the respondent-assessee and the invoices issued by the manufacturer were endorsed evidencing the transfer of goods in transit, which carried with it proof of payment of duty on such inputs. on the basis of the endorsed invoices issued by the intermediatory purchaser and the invoices issued by the manufacturer, the assessee shall be entitled to claim the credit on the goods, on which the manufacturer has paid the duty - Following decision of UNION OF INDIA Vs. RAJASTHAN SPINNING & WEAVING MILLS LTD 2004 (6) TMI 45 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat Credit based on invoices not in the name of the petitioner.
2. Dispute regarding genuineness of invoices issued by dealers.
3. Appeal against rejection of credit by Assistant Commissioner, Commissioner (Appeals), and Appellate Tribunal.
4. Interpretation of whether purchaser can claim Cenvat Credit based on manufacturer's invoices endorsed by dealers.

Analysis:

The petitioner sought relief through a petition under Article 226 of the Constitution to challenge an order denying Cenvat Credit of Rs. 1,28,117 based on invoices not in their name. The petitioner, engaged in manufacturing texturised yarns, purchased yarns from dealers endorsed by the manufacturer. The dispute arose when the Assistant Commissioner, Commissioner (Appeals), and Appellate Tribunal rejected the petitioner's claim, citing invalidity of endorsed invoices post-April 1994.

The petitioner contended that the manufacturer's invoices, though in dealers' names, were genuine and entitled them to credit. The Tribunal's doubt on the invoices' authenticity without granting a hearing was raised as a violation of natural justice. The petitioner relied on a Rajasthan High Court decision supporting credit on endorsed invoices.

The Respondent defended the Tribunal's decision but conceded that genuineness of manufacturer's invoices was not questioned. The Court noted that the manufacturer's invoices were valid, duty was paid, and the only issue was whether the petitioner could claim credit based on these invoices despite being in dealers' names.

Drawing parallels with the Rajasthan High Court case, the Court held that the petitioner was entitled to claim credit based on endorsed invoices from dealers and manufacturer's invoices. The Court quashed the impugned order, allowing the petitioner to avail the credit of Rs. 1,28,117. The judgment was made absolute without costs, aligning with the Rajasthan High Court's interpretation.

In conclusion, the Court's decision favored the petitioner, emphasizing the validity of manufacturer's invoices and the right to claim credit based on endorsed invoices. The judgment provided clarity on the interpretation of Cenvat Credit eligibility, aligning with the Rajasthan High Court precedent.