2009 (7) TMI 90 - HC - Central Excise

Modvat Cenvat Gate pass issued before 1.4.1994 endoreced after 1.4.1994 Held that - The only requirement which is to be completed before 1.4.1994 is that the gate passes have been issued before 1.4.1994 and the other requirement contemplated by the proviso is that the credit under the said rules has been taken on or before 30.6.1994. We therefore do not find any infirmity in the view taken by the Tribunal. We accordingly answer the question referred to us in the affirmative i.e. in favour of respondent-assessee and against the applicant department.

Summary

Issues:
Whether modvat credit is admissible on gate passes endorsed after 1.4.94 and whether notification No.16/94-CE/NT would stand extended if gate passes are issued prior to the date specified in the notification but endorsed subsequently, and whether such gate passes could be recognized as proper duty paying documents.

Analysis:

Issue 1: Modvat Credit on Endorsed Gate Passes
The respondent availed modvat credit under Rule 57-A of the Central Excise Rules based on gate passes endorsed after 1.4.1994. The Assistant Commissioner initiated proceedings for wrong credit availment, leading to an order confirming the demand. The Commissioner (Appeals) allowed the appeal, following a Tribunal decision emphasizing the critical date as the issue date of gate passes, not the endorsement date. The Central Excise Department challenged this decision, but the Tribunal upheld its earlier stance, prompting the Department to seek a reference from the High Court.

Issue 2: Interpretation of Notification No.16/94-CE(NT)
The Madhya Pradesh High Court held that the proviso to the notification required gate passes to be issued before 1.4.1994 and endorsed before that date for modvat credit. The High Court disagreed with the Tribunal's view that endorsement date was irrelevant. The High Court emphasized strict construction of the notification, stating that both issuance and endorsement should precede 1.4.1994 for credit availment. The Central Excise Department argued that the Tribunal erred in favoring the respondent, citing the High Court's decision as a precedent.

Issue 3: Tribunal's Decision and Legal Interpretation
The Bombay Tribunal considered the effect of Notification No.16/1994 and the requirement that gate passes be issued before 1.4.1994 for modvat credit. It differentiated between gate pass issuance date and endorsement date, asserting that the latter was for goods transfer confirmation. The Tribunal also noted the necessity of traders issuing invoices post-Notification No.32/1994 for credit validity. The High Court criticized the Madhya Pradesh High Court's interpretation, emphasizing that only gate pass issuance, not endorsement, was crucial before 1.4.1994 for credit eligibility.

Conclusion:
The High Court upheld the Tribunal's decision, emphasizing that only gate pass issuance before 1.4.1994 was necessary for modvat credit, not the endorsement date. The Court rejected the Madhya Pradesh High Court's view requiring both issuance and endorsement before 1.4.1994. The judgment favored the respondent-assessee, dismissing the Department's appeal and affirming the validity of gate passes issued before the specified date for credit availment.