1996 (4) TMI 280 - AT - Central Excise

Issues:
- Eligibility of appellants for Modvat credit in respect of bottles purchased from M/s. Arizone Printers.
- Whether printing of glass bottles after purchase constitutes manufacture.
- Interpretation of Rule 57G and validity of gate pass for Modvat credit.
- Applicability of Trade Notice No. 81/89 on re-endorsement of gate passes.
- Divergence of views among different Tribunal Benches on Modvat credit eligibility.

Analysis:
1. The appeals revolve around the eligibility of the appellants to claim Modvat credit for bottles bought from M/s. Arizone Printers. The issue hinges on whether the endorsed gate passes issued by M/s. Ballarpur Industries, under which the goods were sold to M/s. Arizone Printers, entitle the appellants to Modvat credit, as per Trade Notice No. 89/92.

2. The appellants' advocate argued that similar cases in the North Regional Bench allowed Modvat credit under comparable circumstances, citing precedents like Delhi Bottling Co. v. CCE, New Delhi. The argument emphasized that the printing of bottles post-purchase does not alter their nature, as held in J.G. Glass Industries v. Union of India. This stance supports the contention that the goods retained their duty-paid status.

3. The debate extended to whether the printing of glass bottles constitutes a manufacturing process. The advocate referenced the judgment in Amritsar Bottling Co. case to assert that the statutory requirement under Rule 57G, regarding the receipt of duty-paid inputs, was fulfilled in the present scenario. The circulars and notifications further supported the appellants' claim for Modvat credit.

4. Conversely, the departmental representative contended that the Board circular only covered scenarios where printing was done on job work basis, not applicable to the current case where the bottles were purchased post-printing. The representative highlighted the lack of control over M/s. Arizone Printers and the absence of records for verification.

5. The Tribunal examined the conditions for Modvat credit eligibility, emphasizing the importance of valid gate passes under Rule 52A. The discussion centered on the validity of gate passes post-delivery and the power conferred on the Board to prescribe alternative documents for Modvat credit, as per Trade Notice No. 81/89.

6. The Tribunal scrutinized the re-endorsement of gate passes and the necessity for adherence to prescribed procedures under Rule 57G. The judgment emphasized the need for strict compliance with statutory documents to prevent misuse and ensure the receipt of duty-paid goods for Modvat purposes.

7. The Tribunal underscored the limitations of gate passes as prescribed documents for Modvat credit and highlighted the Board's authority to designate alternative documents. The judgment referenced the constitutional validity upheld in Bombay Goods Transport v. UOI, affirming the Board's power to regulate prescribed documents under Rule 57G.

8. The Tribunal concluded that the documents presented did not align with the notification under Rule 57G, indicating a transformation in the nature of goods post-purchase. The lack of verifiable records and potential for misuse led to a stringent interpretation of Modvat credit eligibility criteria.

9. Due to conflicting views among Tribunal Benches on Modvat credit cases, the matter was recommended for consideration by a larger Bench for resolution, reflecting the need for uniformity in interpreting Modvat credit provisions across different regions.

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