By TIOL News Service

MUMBAI, MAY 23, 2016: THE appellants had availed credit on invoices dated 16.05.2003 & 23.05.2003 wherein the appellants were not the consignee. Whereas the invoices dated 16.05 were in the name of M/s. Chirag Fabrics Pvt. Ltd., Ahmedabad the other invoices were issued in the name of M/s. Prakash Cotton Mills Pvt. Ltd. All the invoices were also not endorsed in favour of the appellants. The department alleged that no credit could be taken on such invoices as it was in contravention of the CCR, 2002.

Both the lower authorities confirmed the demand and, therefore, the appellant is before the Tribunal.

The appellant argued that rule 7 of the CCR, 2002 permitted availment of credit on invoices issued to any person involved in purchase and sale of yarn or fabrics falling under Chapter 50-55, 58 or 60, provided the said documents are endorsed in full for the entire consignment covered under the said documents in favour of the manufacturer. It was submitted that the invoices were endorsed in favour of the appellants by the persons in whose name the invoices were issued. However, the endorsement was done by a separate letter and not on the body of the invoices. Inasmuch as since the receipt of goods and their duty paid nature is not in dispute, substantial benefit of credit cannot be denied.

The Bench extracted rule 7(1)(e)(b) of the CCR, 2002 and observed -

++ The said rule permits availment of credit if the document is endorsed in favour of the manufacturer. In the instant case the endorsement has not been done in the documents but by a separate letter. I find that procedure prescribed in the said sub-rule is for a reason. The original documents cannot be endorsed to more than one person,however, endorsement by a separate letter can be done to any number of people. It is not understood as to why the appellant had not got the said documents endorsed by the supplier on the body of the documents. The same cannot be considered as a mere procedural formality. Since there is an easy and specific provision in the rule, not following the same, leads to suspicion of evasion.

++ Furthermore, documents are in the name of another person with different address and without proper endorsement on the documents it cannot be said that the goods are indeed received by the appellants. I find no logical reason for appellants to not have followed such aneasy procedure prescribed in Rule 7 and getting endorsement on the body of the invoice.

Holding that the benefit of credit cannot be extended to the appellants, the appeal was dismissed.

(See 2016-TIOL-1218-CESTAT-MUM)