Full Judgment
In the case of M/s Charminar Bottling Co., the assessee manufactured Aerated Waters. The glass bottles for the packing of the aerated waters were manufactured and cleared on payment of Central Excise duty by M/s J.G. Glass Limited, Pimpri, Pune to M/s Arizona Printers and Packers (P) Ltd. who after printing, decorating and repacking, sent them to M/s Charminar by endorsing the gate passes originally issued by M/s J.G.Glass Ltd. Similarly, M/s Prabha Beverages (P) Ltd. manufactured Aerated Waters. They received duty paid glass bottles manufactured by M/s Ballarpur Industries Ltd., Pune after printing/decoration and re-packing of the same by M/s Arizona Printers and Packers under the endorsed gate passes of the original manufacturer of the glass bottles.
The issue for consideration in these appeals is whether the appellants are eligible to take Modvat credit on the strength of the endorsed gate passes received by them. The Southern Bench of the Tribunal has referred these matters to the Larger Bench as they have observed conflict in the two earlier decision of the CEGAT on this issue. The North Regional Bench, permitted the Modvat credit in the case of Delhi Bottling Co. v. CCE - 1995 (78) E.L.T. 505 after the bottles were printed by a printer whereas the East Regional Bench in the case of India Paper Pulp v. Collector of Central Excise, Calcutta - 1994 (73) E.L.T. 752 (Tribunal) has held that where the consignment was broken and lumps were crushed by the first consignee, the modvat credit on the endorsed gate passes was not admissible.
2. We have heard Shri Arvind P. Datar, Advocate for M/s Amritanjan and M/s Prabha Beverages. We also heard Shri Sanjeev Srivastava for the Revenue. We have carefully considered the submissions made before us.
3. In terms of the first proviso to Sub-rule (2) to Rule 57G of Central Excise Rules, 1944, no credit shall be taken unless the inputs are received in the factory under the cover of a Gate Pass, an AR-I, a Bill of Entry or any other document as may be prescribed by the Central Board of Excise and Customs, in this behalf evidencing the payment of duty on such inputs. The Board in terms of the powers conferred under Rule 57G, has issued a Circular which in turn has been issued as Trade Notices by the various Central Excise Collectorates. Central Excise Collector, Calcutta-II Trade Notice No. 87/89 dated 5-5-1989 1989 (41) E.L.T. (T34) in this respect is reproduced below.
"Trade has expressed difficulty in obtaining Modvat Credit on the endorsed gate passes both in respect of the past supplies received as well as the entire goods transferred to a third party. The matter has been examined. It has been decided that original gate pass which has been endorsed once can be further endorsed once more provided that entire goods covered by GP-I are transferred to the third party in Original packing. However, no subsidiary gate pass can be issued on such GP-I which have been endorsed up to two time. It has also been decided that in case part supplies are made from consignment covered under a GP-I and no subsidiary gate pass has been issued for such supplies, then the said GP-I can be endorsed to the buyer of rest of the consignment covered by the said GP-I specifying the quantity of material sold and duty involved on such part supply to Modvat buyer".
4. With regard to the consignments of glass bottles not in their original packing received by the aerated water manufacturers under endorsed gate pass, specific instructions were issued by the Board in Circular No. 19/92 dated 3-9-1992 which were notified by the Central Excise Collectorates in their respective Trade Notices - Madurai Collectorate Trade Notice No 47/92, dated 25-9-1992 being one of them.
In this it is observed that Modvat Credit is not being allowed on the glass bottles received by certain aerated water manufacturers through an endorsed gate passes as the goods were not received in the factory in its original packing. It is clarified that so long as the duty has been paid on the glass bottles at the rate as applicable to glass bottles, the Modvat credit should not be denied merely on the ground that the same are brought into the factory after printing/decoration through a job worker. In such case, the procedures prescribed under Notification 351/86 can be extended so as to cover the job work activities under Notification 214/86.
5. It would be seen from the above that a Gate Pass endorsed twice over has been prescribed by the Board as a valid document for the purpose of availing the Modvat credit provided the entire goods covered by it are transferred to the third party in original packing. The' CBEC by permitting the availing of credit on the endorsed gate passes has relaxed the rigors of Rule 57G. In the matter of glass bottles, their Lordships of the Supreme Court in Union of India v. J.G. Glass Industries Ltd. -1998 (97) E.L.T. 5 (S.C.) have held that printing/decoration carried out on the glass bottles does not amount to manufacture and no duty would be payable again if the printing/decoration is done on the duty paid bottles in separate premises. Therefore, the gate pass issued by the original manufacturer of the glass bottles would not lose its character of a prescribed document evidencing the payment of duty even after endorsement, especially when two time endorsements have been sanctioned by the Board itself. Consequently, so long as the duty paid inputs can be co-related to a particular gate pass, their being in original packing is of little consequence. We are therefore, of the view that this condition in the Board's aforesaid instructions is beyond the provisions of Rule 57G and hence not enforceable in law. In any case, even going by the Board's instructions the 'in original packing' condition of the goods is relevant to the second endorsement of the GP-I and not to that of the first. The instructions read: "It has been decided that the original gate pass which has been endorsed once can be further endorsed once more provided the entire goods covered by the GPI are transferred to the third party in original packing" (emphasis added). In the case of all the appellants before us, the modvat credit is availed on the GPIs endorsed only once in their favour. Therefore, even in the Board's instruction, the condition of the "goods being in original packing" is not applicable in their case. It is not the case of the department in respect of any of the appellants that the goods on which the Modvat credit is taken are not relatable to their respective GP Is. Therefore, there is no ground to deny them the Modvat credit.Delhi Bottling Co. Pvt. Ltd. v. Collector of Central Excise, New Delhi -1995 (78) E.L.T. 505 (Tribunal) and in Haryana Drinks Pvt. Ltd v. Collector of Central Excise, Delhi - 1996 (85) E.L.T. 189 (Tribunal). In the former case, the glass bottles were manufactured by M/s J.G. Glass Ltd. and sent to M/s Arizona Printers who did printing on the bottles and supplied them to M/s Delhi Bottling Co. - the aerated water manufacturers on endorsed gate passes. M/s J.G. Glass Ltd. and M/s Arizona Printers are the same two parties concerned in the manufacture and printing of the glass bottles respectively in the two appeals under consideration before us.
7. In the light of the above discussion, we are of the view that so long as the goods received under the endorsed gate pass are through a single intermediary and they can be co-related to the gate pass, the Modvat-credit cannot be denied for the reasons of the goods not being in original packing.
8. Since in all the six appeals before us, the duty payment on the glass bottles is not in dispute - the controversy being limited only to the bottles not being received in the factory of the appellants in original packing, we allow all the four appeals with consequential relief, if any filed by the assessees. Two appeals filed by the Revenue are dismissed.