2010 (9) TMI 29 - HC - Central Excise

Modvat / Cenvat Valid duty paying document circular dated 8.11.1994 credit on the basis of gate passed issued before 1.4.1994 Held that - Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. - Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. - A show cause notice and demand contrary to existing circulars of the Board are ab initio bad. - It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars Modvat credit amounting to Rs. 23,85,653 allowed.

Issues Involved:
1. Validity of Notification dated 30.3.1994 preventing Modvat Credit after 30.6.1994 based on gate pass issued before 1.4.1994.
2. Challenge to orders/letters dated 20.12.1994, 6.1.1995, and communication dated 8.7.1998.
3. Entitlement of Petitioners to Modvat Credit based on the circular dated 8.11.1994.
4. Compliance with procedural requirements for availing Modvat Credit.

Issue-wise Detailed Analysis:

1. Validity of Notification dated 30.3.1994:
The Petitioners challenged the Notification dated 30.3.1994, which prevented them from taking Modvat Credit after 30.6.1994 on the basis of a gate pass issued prior to 1.4.1994. The Petitioners argued that the Notification was unjust as they were unable to take delivery of the consignment due to a lockout. They received the consignment on 3.12.1994 and availed Modvat Credit in the first week of December 1994. The Respondents, however, directed the Petitioners to reverse the credit, stating that the gate pass was only valid until 30.6.1994.

2. Challenge to orders/letters dated 20.12.1994, 6.1.1995, and communication dated 8.7.1998:
The Petitioners also contested the orders/letters dated 20.12.1994, 6.1.1995, and the communication dated 8.7.1998, which reiterated the requirement to reverse the Modvat Credit. The Respondents maintained that the gate pass issued prior to 1.4.1994 was valid only until 30.6.1994, and the Petitioners did not comply with the extended deadline of 31.12.1994 for submitting the invoice.

3. Entitlement of Petitioners to Modvat Credit based on the circular dated 8.11.1994:
The Petitioners relied on the circular dated 8.11.1994 issued by the Central Board of Excise and Customs (CBEC), which prescribed that an invoice/document issued by the manufacturer from his factory could be a valid document for Modvat Credit purposes if submitted before 31.12.1994. The Petitioners argued that since they submitted the invoice containing details of the gate pass and availed Modvat Credit in December 1994, they should not be deprived of the benefit. The court noted that the circular aimed to mitigate difficulties arising from budgetary changes and allowed acceptance of such documents up to 31.12.1994.

4. Compliance with procedural requirements for availing Modvat Credit:
The court evaluated whether the Petitioners complied with the procedural requirements under Rule 57G of the Central Excise Rules. It was undisputed that the Metal Anodes were cleared from the manufacturer's factory on 28.3.1993 under a statutory gate pass and that the Petitioners filed the necessary declaration under Rule 57G. The court observed that the Petitioners availed Modvat Credit in the first week of December 1994, prior to the extended deadline. The Respondents' refusal to accept the Modvat Credit was based solely on the non-submission of the invoice before 31.12.1994, which the court found to be a highly technical and unwarranted view.

Conclusion:
The court concluded that the Petitioners were entitled to Modvat Credit based on the circular dated 8.11.1994 and the contemporaneous documents submitted. The impugned orders/letters dated 20.12.1994, 6.1.1995, and the communication dated 8.7.1998 were set aside. The court emphasized that the circular issued by the CBEC was binding on the authority and referred to relevant judgments of the Apex Court supporting this view. The Petitioners were granted Modvat Credit in the sum of Rs. 23,85,653, and the rule was made absolute with parties bearing their respective costs.

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