2016 (3) TMI 127 - AT - Central Excise

Cenvat Credit - capital goods acquired on lease basis from other two entities involved in manufacturing activity is correctly taken or not - Held that - In the case of Leamak Healthcare Pvt. Ltd. (2010 (6) TMI 424 - CESTAT, AHMEDABAD) the Tribunal held that the Rule 4(3) only further enlarges scope by stating that the credit would not be disallowed even if capital goods are cleared from the financing company. It does not mean that the capital goods must be acquired from a financing company and any other acquisition of capital goods from the company who is not a financing company will disentitle the availment of credit. The Tribunal held that the interpretation adopted by the Revenue would defeat the very legislative intent of allowing credit in respect of capital goods. Similar findings were recorded earlier in the case of Kalyani Seamless Tubes Ltd. (2004 (8) TMI 217 - CESTAT, MUMBAI ). Considering the above settled position we find no ground for disallowing the credit availed by the appellant in respect of capital goods taken on lease. Regarding denial of credit on certain items of structural steel on the grounds that they do not fall under the definition of capital goods, we find that no categorical finding with specific items and quantum of credit attributable to such items have been made. Considering the credit on these items have already been availed by the units who have later leased them out to the appellant, we find no justification for the observation by the original authorities on these aspects. - Decided in favour of assessee

Summary

Issues:
Cenvat Credit on capital goods acquired on lease from entities engaged in manufacturing activity - Interpretation of Rule 4(3) of Cenvat Credit Rules 2004 - Denial of credit by Revenue - Applicability of credit when capital goods are not acquired from a financing company - Allegation of ineligibility on certain steel items - Judicial precedents supporting the appellant's case.

Analysis:

1. Cenvat Credit on Capital Goods:
The appellants, engaged in manufacturing, were availing Cenvat Credit on various capital goods acquired on lease. The Revenue sought to deny the credit, arguing that Rule 4(3) of the Cenvat Credit Rules 2004 allows credit only when capital goods are procured from a financing company. However, the appellants contended that the entities leasing the capital goods were engaged in manufacturing activities and had availed Cenvat Credit on the same without objection. The Tribunal referred to previous cases like Leamak Healthcare Pvt. Ltd. and Kalyani Seamless Tubes Ltd., where it was held that the credit should not be disallowed if capital goods are acquired from a company other than a financing company. The Tribunal found no grounds to disallow the credit availed by the appellants, setting aside the Revenue's denial.

2. Allegation of Ineligibility on Steel Items:
The Revenue alleged certain steel items were ineligible for credit as they were structural steel items. The appellants argued that this allegation was vague and misleading, as the original authorities did not specify the items or the amount of credit being denied. They relied on the Tribunal's decision in Mahendra & Mahendra Ltd. to emphasize that the admissibility of credit on steel structures should be determined when they are in a movable state, not forming part of immovable structures. The Tribunal found the lack of specific findings on the type and quantity of ineligible credit, making the Revenue's findings unsustainable.

3. Conclusion:
After hearing both sides and examining the records, the Tribunal concluded that the impugned order denying the Cenvat Credit was to be set aside. The appeal was allowed, and consequential relief, if any, was granted to the appellants. The Tribunal highlighted the settled legal position that credit should not be disallowed based on the source of acquisition of capital goods, as long as the goods were acquired on lease. The decision was made based on the interpretation of Rule 4(3) and supported by relevant judicial precedents, leading to the dismissal of the Revenue's denial of credit.

4. Disposition:
The impugned order was set aside, and the appeal was allowed with consequential relief. The Revenue's Counter Objection was also disposed of accordingly.