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Issues:
Appeal against confirmation of demand for Modvat credit based on multiple endorsements on gate passes. Analysis: The judgment revolves around the denial of Modvat credit amounting to Rs. 1,02,600/- due to multiple endorsements on gate passes for input materials received by the appellants' factory. The appeal was rejected based on the ground that gate passes had been endorsed thrice before reaching the factory, contrary to the prescribed procedure. The main contention was whether Modvat credit is permissible for inputs received under gate passes with multiple endorsements. The appellant's representative argued that the Modvat scheme aims to prevent cascading taxation and should not be denied based on technicalities like the number of endorsements. He cited precedents and a trade notice to support his argument that the procedural requirements should not impede the benefit of Modvat credit. The respondent contended that gate passes are meant for initial removal of goods from the factory to the first destination, and subsequent removals need not be under gate passes. While acknowledging the relaxation allowing two endorsements on gate passes, the respondent argued that excessive endorsements would burden verification and could be subject to abuse. The respondent maintained that since the credit was taken on gate passes with more than two endorsements, it should not be allowed. The Tribunal analyzed Rule 57G of the Central Excise Rules, which mandates receiving inputs under a gate pass, and observed that gate passes are intended for the direct receipt of goods from the manufacturer. However, recognizing the practical challenges faced by small-scale units, the Board had relaxed the endorsement requirement up to two times. The Tribunal emphasized the spirit of extending Modvat credit as long as the duty paid nature of goods is evident, as per the relaxation provided by the Board. It criticized the authorities for mechanically rejecting the credit solely based on the number of endorsements, without considering the duty paid status of the goods. The Tribunal set aside the lower authorities' order and permitted the appellants to avail the credit, with the caveat that the Assistant Collector may conduct inquiries to verify the genuineness of the gate passes and the non-utilization of the passes for earlier Modvat credit claims. The appeal was disposed of in favor of the appellants, emphasizing a positive and pragmatic approach towards Modvat credit claims.
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