1994 (3) TMI 228 - AT - Central Excise

Summary

Issues:
- Correctness of procedure followed in receiving goods from IPCL via stockists
- Eligibility for modvat benefit based on the procedure followed

Analysis:
The judgment involves stay applications by two different appellants against two different orders, both revolving around the same issue. The goods received as inputs were manufactured by IPCL but were not directly received from IPCL by the appellants. Instead, the goods were sent to stockists/dealers by IPCL and then sold to the appellants, leading to the goods traveling from Vadodra to Jaipur and then to the appellants' unit. The gate passes issued by IPCL had to be endorsed first to the stockists' godowns and then to the appellants. Some gate passes covered the entire consignment while others covered part consignments.

The main question in both cases was whether the procedure followed was correct and if any errors or omissions would warrant denial of modvat benefit. The appellants argued that the inputs and outputs were declared items, and the inputs received were utilized for manufacturing the declared outputs. They contended that if the department believed there were defects, they should have been advised to rectify them. The appellants had already obtained necessary endorsements on the original gate passes after the case came before the Tribunal.

The department denied modvat benefit due to the appellants not strictly following the procedure. They mentioned that subsidiary gate passes should have been obtained, and only two endorsements were permissible. Endorsed gate passes were acceptable only for whole consignments, not part consignments as per a Government Circular. However, the department had no objection to considering the appeals on the same day.

The Tribunal noted the agreement between IPCL and the appellants, highlighting clauses related to non-tempering of goods and the continuation of title vesting in IPCL until sold. There was no evidence of violation of conditions or tampering of goods. The Tribunal emphasized that substantial benefits should not be denied for minor procedural infractions. Since the appellants rectified the defects by obtaining necessary endorsements on the gate passes, the pre-deposit of amounts in question was waived.

Ultimately, the Tribunal accepted the main appeals based on previous orders emphasizing not denying benefits for minor procedural issues. They noted that proper officers could take further precautions if necessary.