Full Judgment
2. The appellant requires for the manufacture of its final products various inputs. It places orders upon various persons for supply of these goods. In these cases that we are concerned with, supply was made, not by the person on whom these orders were placed, but by another person on whom that person in turn placed orders for supply of the material to the appellant. The evidence of payment of duty on these inputs received by the appellant consists of the gate passes issued by their manufacturers. The evidence of payment of duty which was actually obtained by the appellant and on which he took credit was subsidiary gate passes i.e., certificates by the jurisdictional Superintendent of Central Excise for part of the consignment based on the gate passes issued by the manufacturer. When each of the inputs was received by the appellant it took credit of the duty paid on them as shown in the subsidiary gate passes.
3. Column 6 of the form RG 23A Part-I which the appellant, is required to maintain and an extract of which it is required to be submitted every month to the Superintendent, asks for the name and address of the manufacturer or importer/stockyard from whom the input is received. In this column the appellant indicated the name and address of the person on whom it had actually placed the orders. Since these persons did not manufacture these goods and sopay duty on them, these addresses did not correspond with the address of the manufacturers shown in the subsidiary gate passes. The department concluded from this that the inputs had not paid duty and therefore, after issue of notice and hearing the appellant, the Assistant Collector, whose order has been confirmed by the Collector (Appeals), ordered denial of credit. Hence this appeal.
4. Advocate for the appellant makes the point that the question as to the identity of supplier vis-a-vis identity of the person on whom the order was placed is of no relevance to the department. The rules require that, for availing Modvat credit on inputs, it should be utilised in the manufacture of final products and duty should have been paid on it. These two requirements have been complied with. Therefore, there is no reason to deny credit.
5. The Departmental Representative emphasises that there is no correlation between the names on the subsidiary gate passes and the names in the RG 23A register. He states that the innumerable transactions and the discrepancies, which were found, do not support the duty paying character of the goods.
6. It is a matter of normal commercial practice for a person who is required to supply goods in pursuance of a contract to arrange to have them supplied by other persons. Credit cannot be denied solely because the goods were not supplied by one of the parties to the contract of sale. I do not see anything in the rules relating to Modvat procedure which prohibits this commercial practice. All that the rule require in this regard is that goods which are received should be inputs, and that they have been received and utilised in the manufacture of goods, which have been cleared on payment of duty, and that it should be shown that duty has been paid on them by one of the documents presented for this purpose.
7. Against this background, the fact that there is lack of identity between the names of the persons on whom the order was placed and the name of the person who supplied the goods would not matter. Neither the Assistant Collector nor the Collector (Appeals) say that the goods were not received in the appellant's factory, or that they were not covered by the subsidiary gate passes which issued by the Superintendent.
8. There is however, an area of doubt that the name in RG 23A statutory register do not tally the names in the subsidiary gate passes and that could be possible that the goods in question were not covered by the gate passes. Advocate for the appellant says that he will be able to establish the issue in the claim, to show beyond doubt that the goods are covered by gate passes. In the facts of the case I think this should be done.
9. The Advocate for the appellant says that he will be able to establish before the Assistant Commissioner within 2 months. If the Assistant Commissioner after seeing these documents, is satisfied that the goods, which were received, were duty paid and had been utilised by the appellant, he shall allow the credit.