1997 (8) TMI 148 - AT - Central Excise

Summary

Issues:
Validity of Modvat credit on endorsed invoices post-1-4-1994 under Notification 15/94-C.E.

Analysis:
The primary issue in this case revolves around the validity of Modvat credit on endorsed invoices post-1-4-1994 under Notification 15/94-C.E. The appellant received goods on twice or once endorsed invoices issued by SAIL after 1-4-1994. The Revenue contends that only original invoices issued by a dealer or duplicate copies of invoices issued by a manufacturer are valid for taking credit, not endorsed invoices. The appellant argues that the endorsed invoices from SAIL are legitimate as they contain all necessary details, and the practice of endorsement should suffice as long as the entire consignment is sold against the original manufacturer's invoice. The appellant cites a previous Tribunal case where an endorsed invoice was accepted as substantial compliance with the notification.

The contention by the appellant is that the endorsement of invoices should be considered valid for Modvat credit, as it is a procedural deviation of inconsequential nature. However, the Revenue argues that the Notification 15/94-C.E. does not recognize endorsed invoices as valid documents for Modvat credit. The Revenue asserts that taking credit on such invoices is illegal due to the absence of legal validity for the purpose of Modvat credit. The Revenue emphasizes that the issue is not merely a procedural infraction but a fundamental legal infirmity, leading to the conclusion that the appeal should be dismissed.

Upon careful consideration, the judge notes that under Rule 57G, the Central Board of Excise & Customs has prescribed invoices from dealers and manufacturers as valid documents for Modvat credit. The judge highlights that the chain of invoices from successive sellers/purchasers is crucial for tracking and correlation, and endorsement disrupts this chain. The judge emphasizes that the procedure adopted by the dealers and the purchase of goods without proper invoices is not a minor deviation but a significant breach. The judge cites a previous Tribunal judgment to support the position that a legal infirmity prevents an assessee from taking Modvat credit.

The judge acknowledges the historical practice of using endorsed gate passes for Modvat credit before 1-4-1994 but emphasizes that the introduction of Notification 15/94-C.E. changed the landscape, making trader's invoices the valid document for credit. Consequently, the judge upholds the decision of the authorities to deny Modvat credit in this case, concluding that there is no basis for interfering with the impugned order and rejecting the appeal.