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2018 (7) TMI 1940 - AT - Central ExciseCENVAT Credit - capital goods - denial on the ground that the capital goods in question, being oxygen plant, were leased to the appellant by Praxair India Ltd. - contravention of Rule 4(3) of the Cenvat Credit Rules, 2002 - HELD THAT - The appellant acquired the possession of the equipments under lease agreement and that operation and maintenance of the said plant by Praxair was on payment of agreed lease rent and operation and maintenance charges by the appellant to it are clear. The documents on record also evidence that the oxygen produced at the said plant was solely and exclusively captively used in the factory by the appellant for manufacture of dutiable final products. The issue is no longer res integra. It has been held that ownership is irrelevant for the purpose of availing CENVAT Credit under the Cenvat Credit Rules. Hon ble Bombay High Court in the case of CCE Vs. Modernova Plastyles Pvt. Ltd., 2015 (6) TMI 154 - BOMBAY HIGH COURT held that for taking credit of duty paid on capital goods (moulds) it would not be necessary that capital goods shall be owned by the assessee or those shall be acquired by finance from financing agency and denial of credit based on such ground is unsustainable. The appellant had correctly availed cenvat credit in respect of the duty paid on the capital goods involved and their entitlement to such CENVAT Credit cannot be denied - Appeal allowed - decided in favor of appellant.
Issues:
Disallowed CENVAT Credit on capital goods leased by appellant; Interpretation of Rule 4(3) of Cenvat Credit Rules, 2002; Ownership of capital goods for availing CENVAT Credit; Applicability of decisions in similar cases. Analysis: The appeal was filed against an Order-in-Original disallowing CENVAT Credit on capital goods leased to the appellant by another company. The Commissioner contended that the appellant did not have the right to use the oxygen plant, leading to contravention of Rule 4(3) of the Cenvat Credit Rules, 2002. The Commissioner demanded a significant amount under Rule 12 of the Cenvat Credit Rules, along with interest and penalties. The appellant's factory required oxygen gas, which was provided through an agreement with another company, Praxair India Ltd. The oxygen plant was set up at the appellant's factory, and the oxygen produced was solely used for manufacturing final products. The dispute arose when the Commissioner disallowed the CENVAT Credit taken by the appellant, leading to the appeal. The appellant argued that the Commissioner's findings were erroneous and contrary to established law. The appellant contended that they had received the capital goods at their factory, satisfying the requirements of Rule 3(1) of the Cenvat Credit Rules. The agreement with Praxair involved leasing the equipment, with operation and maintenance managed by Praxair. The appellant's exclusive use of the oxygen plant for manufacturing final products was highlighted. The Revenue reiterated the reasons for disallowing the credit, citing a Tribunal decision in a similar case. The Tribunal analyzed the definition of "capital goods" under Rule 2(b) of the Cenvat Credit Rules, emphasizing that the goods must be used in the factory of the manufacturer of final products. It was established that the oxygen plant was set up at the appellant's factory, and the production was consumed internally for manufacturing dutiable final products. The Tribunal noted that ownership of the capital goods was irrelevant for availing CENVAT Credit, citing relevant legal precedents. The Tribunal also rejected the argument that CENVAT Credit on capital goods leased from a non-financing company was not allowable, citing various decisions supporting the appellant's position. Based on the analysis of legal precedents and the specific circumstances of the case, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeals. The appellant was entitled to the CENVAT Credit for the duty paid on the capital goods involved. The judgment emphasized that ownership of the goods or acquisition from a financing agency was not a prerequisite for availing the credit, aligning with established legal principles and precedents in similar cases.
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