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2015 (10) TMI 375 - ALLAHABAD HIGH COURT

2015 (10) TMI 375 - ALLAHABAD HIGH COURT - 2016 (331) E.L.T. 369 (All.) - Cenvat credit - Job worker availed the credit on the basis of endorsed Invoice - period April to August, 1994 - Invoices were in favor of principal manufacture - it is not in dispute that the applicant received the goods, which was duty paid. It is also not in dispute that the duty paid goods received by the appellant was processed for the ultimate manufacture of the end product and was given to the manufacturer. The only .....

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ate passes were considered as valid documents under which goods were cleared by the manufacturer and also could be transferred by a dealer to a third party. Two endorsements were made permissible on the gate passes - From the aforesaid, it is clear that credit would be given on an invoice bill, which indicates payment of duty on such inputs. In the instant case, the invoice bill was produced, which evidenced payment of excise duty on the inputs received by the applicant. The said bill was endors .....

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MODVAT credit. - credit allowed - Decided in favor of assessee. - Central Excise Reference No. 23 of 2002, Central Excise Reference No. 1 of 2011 - Dated:- 29-9-2015 - Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani, JJ. ORDER ( Per: Tarun Agarwala, J. ) The applicant M/s Uni Cast Pvt. Ltd. is a job worker of Paharpur Cooling Towers Ltd. (PCT) and received the raw material from PCT for execution of job work and supply of the final product to PCT. PCT purchased the inputs neede .....

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credit for the period April to August, 1994. A show cause notice was issued contending that MODVAT credit was obtained on the strength of invoice endorsed by PCT in their favour, which is inadmissible as endorsed invoices were not proper documents for the purpose of availing MODVAT credit under Section 57A and 57G of the Central Excise Rules, 1944. Subsequently, the authorities disallowed the MODVAT credit on the ground that endorsed invoices were not valid documents for taking MODVAT credit, i .....

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nal to draw a statement of case and refer the following substantial question of law, namely: "(i) Whether M/s PCT Ltd. having supplied the raw material to the applicant having company (job worker) and the applicant having received the said raw material directly from the supplier, was entitled for the benefit of MODVAT credit under the Central Excise Rules? (ii) Whether, admittedly the applicant being the job worker and the inputs having been dispatched to the job work's factory premises .....

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of the payment of duty, the applicant was entitled for the MODVAT credit? (iv) Whether when the manufacturer is a job worker, the inputs are not being purchased by him and therefore the invoices in respect of the inputs cannot be in his name? (v) Whether in the absence of transfer by title by endorsement in the documents of title, the property in the good is never transferred by the endorser in favour of the endorsee and the Appellate Tribunal was not justified in denying the benefit of MODVAT .....

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aforesaid questions of law for opinion of the High Court. Balmer Lawrie and Company are manufacturers of steel metal containers (drums). Invoices were issued by SAIL in favour of M/s IOC Ltd., Mathura, who in turn, endorsed these invoices to the applicant. The applicant availed MODVAT credit on the inputs received for the month of October to December, 1994 on the basis of the invoices issued by SAIL to IOC, Mathura, which was subsequently, endorsed by IOC, Mathura to the applicant. The departmen .....

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end the statement of case along with the following questions of law, namely:- "1. Whether, Steel Authority of India Limited having supplied the steel to the applicant-appellant (job worker) under the instructions of Indian Oil Corporation Ltd. for converting it into drums (metal containers), the applicant was entitled for the benefit of MODVAT credit under Central Excise Rules? 2. Whether, in the absence of transfer of title by endorsement on the documents of title, the property in the good .....

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ri Piyush Agrawal, the learned counsel for the applicant and Sri Siddharth Shukla and Sri R.C. Shukla, the learned counsel for the respondent. Having heard the learned counsel for the parties, in our view, the short controversy, which pin points the real issue and which arises for consideration is, "whether endorsed invoices are valid documents for taking MODVAT credit after 1st April, 1994." Accordingly, the question of law is modified accordingly as above. Prior to the issuance of No .....

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e passes were prescribed as valid documents along with AR-1 or bill of entry under Rule 57G for availing MODVAT credit. This Notification No.15 of 1994 created difficulties to the genuine end users of the goods where MODVAT credit was being made on the basis of gate passes. In many cases, gate passes were issued prior to 30th March, 1994 but the goods were not received after 30th March, 1994. It was made clear that MODVAT credit could be taken on or before 30th June, 1994 on the strength of gate .....

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quired to be countersigned by the proper officer. Explanation. - In this rule, and in any other rule, where the term invoice or gatepass, as the case may be, is issued it shall mean - (i) assessee's own document such as invoice, challans, advice or other document of similar nature generally used for sale or removal of excisable goods and which shall contain all the particulars as required under the said Act or in these rules; or (ii) such other form as the Central Board of Excise and Customs .....

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he manufacturer may make out a single invoice, at the end of the day: Provided further that for any excisable goods, other than those to which the provisions of Chapter VII-A apply, the invoice shall be presented to the proper officer for counter-signature at least one hour before the actual removal of goods from the factory. After counter-signature the proper officer shall return all the copies of the invoice to the manufacturer except the triplicate required for his record. (4) If all the pack .....

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or at intervals, a separate invoice shall be made out in respect of each vehicle, vessel, pack animal or other conveyance. (5) Invoice shall be maintained in two sets - (i) one for clearance for home consumption; and (ii) the other for clearances for export. (6) Each invoice shall bear a printed serial. Only one invoice book of each type shall be used by a factory for removal of excisable goods at any one time unless otherwise specially permitted by the [Commissioner] in writing. (7) Each foil .....

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arehouse without a valid invoice, or (b) while carrying or removing such goods from a factory or warehouse does not on request by an officer, forthwith produce a valid invoice, or (c) enters any particulars in the invoice which are, or which he has reason to believe to be false, he shall be liable to a penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to in clauses (a), (b) or (c) has been committed and such excisable .....

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sioner may require, and obtain a dated acknowledgement of the said declaration. (2) A manufacturer who has filed a declaration under sub-rule (1) may, after obtaining the acknowledgement aforesaid, take credit of the duty on the inputs received by him. (3) No credit under sub-rule(2), shall be taken by the manufacturer unless the inputs are received in the factory under the cover of any of the following documents, namely:- (a) an invoice issued by a manufacturer of inputs under Rule 52A or 100E .....

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ge dealer of excisable goods, registered under Rule 174; (f) an invoice issued by a second stage dealer of excisable goods, registered under Rule 174 and duly authenticated by the proper officer; (g) an invoice issued by a dealer on or before the 31st day of August, 1996; (h) an invoice issued by an importer registered under Rule 174 and duly authenticated by the proper officer; (i) an invoice issued by an importer from his depot or from the premises of the consignment agent of the said importer .....

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or by the proper officer in the Customs area under Rule 57E; and (m) an invoice issued by a manufacturer of final product under sub-rule (3) of Rule 57F or sub-rule (1) of Rule 57S. Explanation.-For the purposes of this section,- (i) "first stage dealer" means a dealer who purchases the goods directly from- (a) the manufacturer under the cover of an invoice issued under Rule 52A or Rule 100E or from the depot of the said manufacturer or from any other premises from where the goods are .....

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r, 1996. (5) Credit shall also not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3) and where the intermediate products manufactured by the user of inputs specified under Rule 57J are received by the manufacturer, after nine months. (6) Notwithstanding anything contained in sub-rule (3) or Rule 52A - (i) a manufacturer may take credit on inputs received in his factory; or (ii)a person registered under Rule 174 for issue of invoice under .....

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onerate, as the case may be, has been lost in transit, subject to the satisfaction of the Assistant Commissioner of Central Excise that the inputs have been received in the factory of the said manufacturer or, as the case may be, the said person registered under Rule 174, and the duty was paid on such inputs: Provided that no credit or receipt entry, shall be allowed under this sub-rule after six months of the date of issue of the said invoice or bill of entry, as the case may be, and where the .....

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ch month to the Superintendent of Central Excise, a monthly return indicating the particulars of the inputs received during the month and the amount of credit taken. The manufacturer shall also submit original duty paying documents and extracts of Part I and Part II of For R.G. 23A maintained along with the monthly return to the Superintendent of Central Excise, who shall after verifying their genuineness, deface such documents and return the same to the manufacturer: Provided that the Commissio .....

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n a financial year, the provisions of this sub-rule shall have effect in that financial year as if for the expression "month", the expression "quarter" were substituted. (9) Where a manufacturer was, for sufficient reasons, not in a position to make a declaration under sub-rule (1) and makes the declaration subsequently, the Assistant Commissioner may, subject to the provisions of sub-rule (10) and for reasons to be recorded in writing, condone the delay in filing of such dec .....

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As a result of the aforesaid amendment, MODVAT credit could be availed on the basis of an invoice but not on the basis of a gate pass. Further, two endorsement on the gate pass was done away. This caused unavoidable expenditure on account of double transportation and material handling besides loss of time, inasmuch as some of the inputs on which MODVAT credit was taken had to be initially sent to another manufacturer, namely, the job worker who after processing returned it to the manufacturer. .....

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ame and, thereafter, returned the same to the manufacturer. Considering the aforesaid factor and the genuine difficulties faced by the genuine users of the end product, the Central Board of Excise and Customs issued a Circular No.146/57/95-CX dated 12th September, 1995. For facility, the same is extracted hereunder: "Government of India Ministry of Finance (Department of Revenue) New Delhi Subject: Procedural relaxation regarding Modvat Credit. Representations have been received from the ma .....

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b workers. It is represented that this procedure entails avoidable expenditure on account of double transportation and material handling, besides loss of time. 2. It has been suggested that to get over the difficulties inherent in the existing procedure, the inputs could move directly from the supplier to the job workers without being routed through them. The inputs could be consigned to the job workers directly on account of such manufacturers as in the case of registered dealers. 3. The matter .....

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nder Rule 52A will however contain, in addition to the prescribed details including the consignee's name and address mentioned therein, the registered person's name and address, on account of whose instructions, the goods have been dispatched. The consignee in this case will be the end user (job worker). 4. It has been decided that the aforesaid circular shall apply mutatis mutandis to those cases also where inputs are supplied to a job worker under the instructions of another manufactur .....

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. 6. Field formations may please be informed accordingly." Under this circular, it was clarified that where inputs are supplied directly to the job worker under instructions of another manufacturer, in such a situation the invoice bill would contain the name of the manufacturer as well as the name of the job worker. Based on the amended Rule, the department permitted issuance of further invoices prior to the issuance of the circular dated 12th September, 1995 under Section 57G of the Rules .....

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ject behind Rule 57A read with Rule 57G was utilisation of credit allowed towards payment of duty on any of the final products in relation to manufacture of which such inputs were intended to be used in accordance with the declaration under Rule 57G of the Rules. It was contended that payment of such excise duty must be evidenced by relevant document, which in the instant case was not disputed, inasmuch as the invoice issued by the supplier indicated payment of excise duty. On the other hand, th .....

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was processed for the ultimate manufacture of the end product and was given to the manufacturer. The only defect in the process of availing MODVAT credit was that the invoice was not marked by the original supplier in favour of the applicant as per the circular dated 12th September, 1995 but the same was endorsed by the manufacturer, namely, PCT. The particulars mentioned in the invoices are not in dispute nor its correctness on duty paid quantity, etc.is doubted. The question whether Rule 57G o .....

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right. The Court held that from a conjoint reading of Rule 52A and 57G, filing of documents for availing MODVAT credit was only a procedural matter and that MODVAT credit could not be denied on the ground that the documents referred to in the Rules did not strictly comply with the said Rules, especially when it contained the details of payment of dues, description of goods, assessible value, name of address of the factory, etc. In our opinion, we need not dwell any further on this subject. We ar .....

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e Supreme Court explained the object and scope of MODVAT credit holding:- "9. Modvat is basically a duty -collecting procedure, which aims at allowing relief to a manufacturer on the duty element borne by him in respect of the inputs used by him. It was introduced w.e.f. 1.3.1986. The said scheme was regulated under rules 57A to 57J of Central Excise Rules, 1944. Rule 57A entitled a manufacturer to take instant credit of the central excise duty paid on the inputs used by him in the manufact .....

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e final products in relation to manufacture of which such inputs were intended to be used in accordance with the declaration under rule 57G. Rule 57-I referred to consequences of taking credit wrongly. 10. The object of the Modvat scheme was to reduce cost of final product by taking credit for the duty paid on the inputs." Similarly, the Supreme Court in Madras Cements Ltd. Vs. Commissioner of Central Excise, 2010 (254) ELT 3 held: "In order to avail of Modvat/Cenvat credit, an Assesse .....

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the inputs were processed and, thereafter, the goods were supplied to the manufacturer. Consequently, when the genuineness of the transaction is established and the inputs received by the applicant has suffered excise duty, there is no reason why the applicant should be denied what is legitimately due to it. In the facts and circumstances of the case, the applicant is entitled to MODVAT credit. Prior to 1st April, 1994 gate passes were considered as valid documents under which goods were cleare .....

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