Case: Commissioner of Central Excise Vs. M/S. Modernova Plastyles Private Limited &amp; Another

this Court in Misc. Civil Application No.606/2002 dated 15th July, 2009 as well as dated 31st August, 2010 in Central Excise Appeal No.2 of 2006 in the case of The Commissioner of Central Excise V/s. M/s. Nylocraft Precision Plastics Pvt. Ltd. and Others. He further relies on the judgments rendered by two other High Courts, namely, Gujarat and Punjab & Haryana reported in 2010 (262) E.L.T. 110 (Gujarat) and 2009 (236) E.L.T. 660 (P & H) respectively.10. Sub-rule (3) of Rule 57R which read before amendment as:(3) No credit of the specified duty paid on the capital goods shall be allowed if such capital goods are acquired by a manufacturer on lease, hire-purchase, loan or by any other transaction other than direct purchase, whereby the property in the said capital goods is not transferred to such manufacturer.9. After amendment in 1994, the sub-rule (3) of Rule 57R read thus:-(3) The credit of the specified duty paid on the capital goods shall be allowed to a manufacturer if the capital goods are acquired by the manufacturer on lease, hire-purchase or loan agreement, from a financing company subject to the following procedure, namely:(i) The manufacturer shall file a declaration before the Assistant Commissioner of Central Excise as required under rule 57T;(ii) The manufacturer availing credit of the specified duty paid on capital goods, who has entered into a financial arrangement, -(a) for financing the cost of such capital goods excluding the specified duty, shall produce a copy of the invoice referred to in rule 57T, evidencing payment of specified duty along with a copy of the agreement entered into by him with the said financing company; or(b) for financing the cost of such capital goods including the specified duty, shall produce a certificate from the financing company to the effect that the duty specified on such capital goods has been paid by the said manufacturer to such financing company, prior to payment of first lease rental installment or first hire-purchase installment or first installment of repayment of loan, as the case may be, along with a copy of the agreement entered into with the said financing company;(iii) The manufacturer and the financing company shall not claim depreciation under the Income-tax laws on that part of the value of capital goods which represents the amount of specified duty paid on such capital goods.(iv) The relevant documents required for the purpose of availing credit of the specified duty paid on such capital goods under rule 57T shall bear the name of the manufacturer along with that of the financing company.11. In the present case undisputedly the respondent-assessee is engaged in manufacturer of plastic articles /components and parts by using injection moulding machines and manufactures finished goods as per the requirement of the original equipment manufacturers. It is not in dispute that the moulds supplied by the supplier are capital goods. The moulds used for injection moulding machine to manufacture the goods/finished products were supplied to the respondent assessee by original equipment manufacturer. These were duty paid moulds by the original manufacturer. Credit of the duties on moulds was being taken by the assessee. It is also not in dispute that the moulds supplied by the supplier are capital goods.12. Though reliance is being placed by the appellant in the case of Terene Fibres India Pvt. Ltd. vs. Commissioner of Central Excise, Mumbai VI. In said case ultimate decision after difference of opinion between the members in the Division Bench of the Tribunal has been rendered in favour of the assessee holding that the demand is unsustainable. From the Judgment as has been rendered it is difficult to consider that there is a clear decision by the Tribunal that modvat credit would not be available to the respondent-assessee if the property in capital goods continued to vest in the supplier.13. However, various citations relied on behalf of the respondents by Mr. M.H. Patil, learned counsel for the assessee, are pointer to the prevailing position in the matter. The assumption that, in case the property in capital goods continued to be in original equipment manufacturers, credit cannot be taken by the vendor manufacturer-assessee would not be proper. There is considerable force in the submissions of Mr. Patil that it is not necessary that capital goods shall be owned or be acquired by the vendor/manufacturer-assessee and that assessee cannot be denied credit on the said ground.14. In the present case there is no dispute that duty paid on capital goods-moulds, were supplied by the original manufacturer to the assessee. Perusal of rules before and after amendment the requirement of ownership was in the erst while regime upto 1994 as governed by then subsisting rules. After 1994, sub rule 3 of Rule 57R having under gone amendment to it, removed such requirement of ownership/acquisition from financing agency. For taking credit of duty paid on said goods, it would not be necessary that capital goods shall either be owned by the assessee or those shall be acquired by finance from financing agency. Denial of credit based on such ground is unsustainable.15. We therefore consider that having regard to the prevailing legal position applicable to the case of the respondent assessee, Modvat/Cenvat credit cannot be disallowed to the assessee and it would be entitled to the same. We also consider that the decision of the Tribunal in the case of Terene Fibres India Pvt. Ltd. vs. Commissioner of Central Excise Mumbai VI would be of no assistance to the appellant Revenue to carry forward its case, for, it cannot be said that in the said case there has been conclusive decision as is being assumed by the appellant revenue. Further having regard to the various decisions relied on behalf of the respondent assessee the decision relied on behalf of the appellant revenue is of little efficacy from position emerging from decision rendered by the Supreme Court in Marmagoa Steel Ltd. (supra) and other orders passed by this Court as well as decisions of Gujrat and Punjab & Haryana High Courts.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]11. In the present case undisputedly theis engaged in manufacturer of plastic articles /components and parts by using injection moulding machines and manufactures finished goods as per the requirement of the original equipment manufacturers. It is not in dispute that the moulds supplied by the supplier are capital goods. The moulds used for injection moulding machine to manufacture the goods/finished products were supplied to the respondent assessee by original equipment manufacturer. These were duty paid moulds by the original manufacturer. Credit of the duties on moulds was being taken by the assessee. It is also not in dispute that the moulds supplied by the supplier are capitalis considerable force in the submissions of Mr. Patil that it is not necessary that capital goods shall be owned or be acquired by theand that assessee cannot be denied credit on the said ground.14. In the present case there is no dispute that duty paid on capitalwere supplied by the original manufacturer to the assessee. Perusal of rules before and after amendment the requirement of ownership was in the erst while regime upto 1994 as governed by then subsisting rules. After 1994, sub rule 3 of Rule 57R having under gone amendment to it, removed such requirement of ownership/acquisition from financing agency. For taking credit of duty paid on said goods, it would not be necessary that capital goods shall either be owned by the assessee or those shall be acquired by finance from financing agency. Denial of credit based on such ground is unsustainable.15. We therefore consider that having regard to the prevailing legal position applicable to the case of the respondent assessee, Modvat/Cenvat credit cannot be disallowed to the assessee and it would be entitled to the same. We also consider that the decision of the Tribunal in the case of Terene Fibres India Pvt. Ltd. vs. Commissioner of Central Excise Mumbai VI would be of no assistance to the appellant Revenue to carry forward its case, for, it cannot be said that in the said case there has been conclusive decision as is being assumed by the appellant revenue. Further having regard to the various decisions relied on behalf of the respondent assessee the decision relied on behalf of the appellant revenue is of little efficacy from position emerging from decision rendered by the Supreme Court in Marmagoa Steel Ltd. (supra) and other orders passed by this Court as well as decisions of Gujrat and PunjabHaryana High Courts.