2018 (12) TMI 771 - AT - Central Excise

CENVAT Credit - requirement of endorsement as per Circular dated 10.04.1986 not being complied prior to availing the credit - Held that - The non-endorsement of the relevant Gate Passes was at the most, a bonafide and rectifiable defect of a procedural/technical nature. Such defect has already been rectified and proper endorsement in favour of the respondent has already been made by the Railway Authorities. The original Gate Passes in proper form and duly endorsed by the Railway Authorities were produced before the Additional Commissioner. The Additional Commissioner has himself held that the Respondent was entitled to restoration of the credit once the Gate Passes were endorsed on 6.2.1992 and 16.12.1992. The credit is allowable to the respondent as per the instructions issued by the CBE&C by its Circular No.441/7/99-CX dated 23.02.1999 - By the said circular, the Board directed the Central Excise Authorities to allow credit of the duty paid on inputs ignoring minor procedural lapses in the Invocie/documents based on which the credit is taken if it is proved that the inputs have suffered duty and were used in the process of manufacture. The Board further directed that all pending cases may be disposed off in accordance with the guidelines laid down in the aforesaid Circular. All the particulars in respect of the said MCI inserts and the credit taken thereon were duly entered in the RG23A Parts I & II, the extracts whereof were regularly submitted by the Respondent to the Central Excise authorities alongwith the monthly RT-12 returns. The bona fide omission to furnish the duty paying documents for defacing cannot be treated as suppression of facts by the Respondents. It is well settled that when availment of credit and utilization thereof has been reflected in RT-12 Returns, the non submission of duty-paying documents cannot be treated as suppression of facts. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Requirement of endorsement on Gate Passes for availing Modvat Credit.
2. Procedural lapses and their rectification in availing Modvat Credit.
3. Applicability of Circulars and Notifications vis-à-vis statutory provisions.

Detailed Analysis:
1. Requirement of Endorsement on Gate Passes for Availing Modvat Credit:
The primary issue in this case revolves around whether the respondent could avail Modvat Credit based on Gate Passes issued in the name of the Railway Authorities without obtaining an endorsement in their favor. The respondent argued that Rule 57G(2) of the Central Excise Rules, 1944, does not mandate that the Gate Pass should be in the name of the assessee or endorsed in their favor. The department, however, contended that as per the Ministry of Finance Circular dated 10.04.1986, credit was permissible only if the Gate Pass was endorsed in favor of the manufacturer availing Modvat relief. The Tribunal found that the non-endorsement of the Gate Passes was a procedural lapse, which was subsequently rectified, and thus, should not disqualify the respondent from availing the credit.

2. Procedural Lapses and Their Rectification in Availing Modvat Credit:
The Tribunal acknowledged that the MCI Inserts were received and used by the respondent in the manufacture of dutiable final products, and appropriate duty was paid on these inserts. The Commissioner (Appeals) noted that the procedural lapse of non-endorsement was rectified when the Gate Passes were endorsed on 06.02.1992 and 16.12.1992. The Tribunal held that such procedural lapses should not hinder the availing of Modvat Credit, especially when the substantive conditions (receipt, use, and duty payment) were met. This view was supported by the Board’s Circular No. 441/7/99-CX dated 23.02.1999, which directed that minor procedural lapses should not obstruct the allowance of credit if the inputs had suffered duty and were used in manufacturing.

3. Applicability of Circulars and Notifications vis-à-vis Statutory Provisions:
The Tribunal observed that the Circular dated 10.04.1986, which required endorsement for availing Modvat Credit, was in conflict with Rule 57G(2) of the Central Excise Rules, 1944. It was held that a circular cannot impose conditions that restrict the scope of statutory provisions. This principle was reinforced by the Supreme Court in Sandur Micro Circuits Ltd. vs. Commissioner of Central Excise, which stated that a circular cannot whittle down or restrict the scope of a statutory notification. The Tribunal also referred to other judicial precedents, including Tata Teleservices Ltd. vs. Commissioner of Customs and Pioneer India Electronics (P) Ltd. vs. Union of India, which emphasized that circulars cannot impose limitations not present in the statutory provisions.

Conclusion:
The Tribunal concluded that the respondent was entitled to avail Modvat Credit despite the initial procedural lapse of non-endorsement of Gate Passes, as the defect was rectified, and all substantive conditions were met. The appeal filed by the Revenue was rejected, and the order of the Commissioner (Appeals) was sustained, affirming that procedural lapses should not obstruct the availing of credit when the substantive conditions are satisfied. The Tribunal's decision was supported by various judicial precedents and Board’s circulars, ensuring that the statutory provisions were not undermined by restrictive circulars.