ORDER
A.C.C. Unni, Member (J)
1. By impugned order-in-original dated 27-12-1996, Modvat credit to the tune of Rs. 13,85,378.37 claimed by the appellants was disallowed by Collector, Central Excise, Kanpur, and a penalty of Rs. 1.5 lacs imposed.
2. Modvat credit was denied on the ground that the duty paying documents viz. the Bills of Entry were not in the name of the appellants but in the name of another company. The appellants’ case is that the Bills of Entry had been endorsed in their name and since the Bills of Entry after its endorsement in their name showed them as the recipients of the inputs there was no justification for denying their claim for Modvat credit. The Department contends that where a Bill of Entry shows the name of an importer other than the actual claimant for Modvat and the inputs had not been directly received by the claimant the receipt of the inputs should have been supported by an invoice issued by the importer. The Collector relied on Notification No. 16/94-C.E. (N.T.), dated 30-3-1994 in support.
3. When the matter was called, Shri A.K. Jain, learned Advocate appeared for the appellant and Shri P.K. Jain, SDR appeared for the respondent – Collector.
4. Brief facts of the case are: M/s. Gehring India, the present appellants are engaged in the manufacture of honing machines falling under sub-heading 8460.00. They are, according to the appellants, a Division of M/s. Ema India Ltd. a company registered under the Companies Act. Appellants’ claim for Modvat credit on inputs was rejected on the ground that Modvat credit had been taken on the basis of Bills of Entry which were in the name of M/s. Ema India Ltd. and received by them (Ema India Ltd.) prior to April 1994 and transferred to the present appellants by GP 1s only on 1st July, 1994 or thereafter. Since Ema India Ltd. importers shown in the Bills of Entry were themselves a registered unit under Central Excise law, entitlement of Modvat credit, according to the impugned order, could be claimed only by them and not by an endorsee or under any G.P. 1 after 30-6-1994 in terms of Notification No. 32/94-C.E. (N.T.). As regards Board’s Circular 179/13/96-CX, dated 29-2-1996 which permits availment of Modvat credit by a manufacturing unit on endorsed Bills of Entry where Bill of Entry is in the name of the Registered Office/Head Office, the Commissioner had held that the circular provides that credit on endorsed Bill of Entry should not be denied if they were in the name of the Registered Office/Head Office. In terms of the said circular, according to the Commissioner, though the assessee’s Registered Office or Head Office might have been located at the same premises of the importer, benefit of Board’s circular will not apply in the present case since the manufacturing units were located at different places.
5. Learned Counsel submitted that apart from the question of admissibility of endorsed Bill of Entry, in the instant case the Adjudicating Officer has gone beyond issues raised in the show cause notice inasmuch as whereas the show cause notice referred to Notification 32/94, dated 4-7-1994 declaring various types of invoices as admissible duty paying documents, the impugned order had relied on Notification 16/94, dated 30-3-1994 which prescribed G.P.ls issued prior to 1-4-1994 as valid documents for a temporary period of three months and stated that where the G.P.ls were issued by the supplier before 1-4-1994 but the goods were received by the purchaser on or after 1-4-1994, the purchaser can get Modvat benefit provided credit under Rule 57G is taken before 30-6-1994. Impugned order had therefore held that credit on endorsed G.P.ls would be admissible only up to 30-6-1994. Further, relying on the recent judgment of the Tribunal in Triveni Engineering Works Ltd. 1996 (15) R.L.T. 697], the learned Advocate contended that a liberal construction should be allowed to the Modvat provisions and where there is substantial compliance of the requirement of the Rules, denial of Modvat credit facility was not justified.
6. Appearing for the respondent-Collector SDR Shri P.K. Jain, referred to the Annexure to the show cause notice showing the date of gate passes and Bills of Entry relating to the inputs received by the appellant which clearly showed that though Bills of Entry and G.P. 1s were issued on various dates, entries relating to receipt of inputs in the appellants’ RG 23A was made more than three months after the date shown in the Bills of Entry/G.P. 1s. This, according to learned SDR, clearly showed that inputs were actually received by Ema India Ltd. and were transferred to the appellants much later without cover of any invoices which was clearly not envisaged under Rule 57G as amended. He therefore reiterated the findings of the lower authority and pleaded for the rejection of the appeal.
7. We have considered the submissions made on both sides. Two short points arise for consideration:
(a) whether availment of Modvat credit during the period July, 1994 to September, 1994 on inputs received by a unit registered under Rule 174 on the basis of endorsed Bills of Entry by another registered unit is permissible;
(b) whether adjudicating authority can travel beyond the issues raised in the show cause notice.
We find that there is no dispute about the fact that original Bills of Entry showed M/s. Ema India Ltd. as the importer and the Bills of Entry were subsequently endorsed in favour of the present appellants. According to the appellants M/s. Ema India Ltd. was the company and the appellants were only a Division of Ema India Limited. According to the ld. Counsel in terms of Board’s Circular 179/13/96-CX, dated 29-2-1996 the appellants were clearly entitled to avail Modvat credit on endorsed Bills of Entry since Bills of Entrywere in the name of the Registered Office/Head Office of Ema India Ltd. which was also the Registered Office of the appellants. On a perusal of a copy of Circular No. 211/45/96-CX, dated 14-5-1996 (Annexure XXII to Memo of Appeal) clarifying the provisions of Circular 179/13/96/CX, we find that the appellants’ submissions have some force. By Para 4 of the said circular it was clarified that in the case of the similar problem of procurement of goods from the domestic market Modvat credit should not be denied where invoice is in the name of the Registered Office/Head Office provided the entire consignment is received in the factory in the original packed condition and the duplicate copy of Rule 52A invoices is endorsed by Registered Office/Head Office to the effect that the consignment covered by the invoice is delivered to the manufacturing unit for availing credit. In terms of Board’s Circular 179/23/96/CX, which was intended to provide the facility of endorsement of Bill of Entry in favour of manufacturing units where the Bill of Entry was in the name of Registered Office/Head Office, Bill of Entry drawn in the name of the Registered Office of a manufacturer is to be considered a valid document for purposes of allowing Modvat credit. It is not in dispute that the present appellants’ Registered/Head Office and that of Ema India Ltd. were the same. Department has also not disputed the present appellants’ claim that they are a Division of Ema India Ltd. Though, no doubt both Ema India Ltd. and Gehring India are separately registered under Central Excise Rules, the conditions envisaged under the Board’s Circular No. 179/13/96/CX read with No. 211/45/96-CX cannot be said to have been not satisfied in this case merely for the reason that Ema India Ltd. are also availing Modvat credit for their final products. The Department has not disputed the appellants’ contention that the two units are producing different final products. In these circumstances we do not agree with the view taken in the impugned order that since the relevant Bills of Entry against which inputs were purchased were in the name of Ema India Ltd., entitlement of Modvat credit on those documents will be admissible only to M/s. Ema India Ltd. and not to the present appellants. We note that this Tribunal has [consistently] held that endorsed Bills of Entry are valid duty paying documents [CCE v. Bharat Wire Products and Ors – 1997 (21) R.L.T. 578 – See also 1996 (13) R.L.T. 907 and 1996 (84) E.L.T. 214].
8. We find that the Collector has relied on Notification No. 16/94-C.E. (N.T.), dated 30-4-1994 providing that documents issued prior to 1-4-1994 will be valid documents only for a period of three months for holding that credit taken on the cover of endorsed G.P. 1s during July, 1994 to September, 1994 would not be admissible. The ld. Counsel had contended that the SCN had made no mention of Notification No. 16/94 and therefore the impugned order had exceeded the ambit of the SCN. We find that this contention is factually correct inasmuch as the Collector has relied on Government of India Notification No. 16/94, dated 30-4-1994 for holding that credit taken on endorsed G.P. 1s in the months of July, 1994 and September, 1994 were not admissible after the amendment of Rule 57G for purchases after 30-6-1994. The SCN had, in fact, referred to Notification 32/94, dated 4-7-1994 prescribing the various types of invoices and had alleged that the appellants had availed credit on the basis of other documents like endorsed Bills of Entry and G.P. 1s. We are, therefore, in agreement with the ld. Counsel’s contention that the impugned order is liable to be set aside on this ground also.
9. Having regard to the discussion above, we are inclined to allow the appeal. The appeal is accordingly allowed and the impugned order set aside with consequential reliefs to the appellants as admissible under law.