2013 (9) TMI 94 - HC - Central Excise

Entitlement of MODVAT Credit - Capital Goods - ownership - Credit availed by the Job Worker - assessee herein had received the said capital goods under a leave and licence agreement, the ownership of the said capital goods rested with M/s.Hyundai Motors India Limited and the assessee was not the owner of the said capital goods at any point of time - Extended period of limitation - Suppression by Assessee - Rule 57T of Central Excise Rules - Held that - There was no ground to disturb the order of the Tribunal, more so in the context of the Central Board s clarification that the job workers were entitled to claim MODVAT credit as per the Board s circular. It was a matter of relevance to note that the decision of the Delhi High Court in SHARDA MOTORS INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., CHENNAI-II 2002 (3) TMI 188 - CEGAT, NEW DELHI had attained finality and the Department had also accepted the same there was no justification in the Department taking a diametrically opposite view - The clarificatory letter clearly indicated the intention of the Revenue to grant relief in respect of job worker and to the persons who obtained capital goods Decided in favour of Assessee.

Summary

Issues:
1. Eligibility for MODVAT credit on capital goods under Central Excise Rules, 1944.
2. Requirement of ownership declaration for availing MODVAT credit.
3. Interpretation of 'leave and licence' agreement for MODVAT credit eligibility.

Analysis:
1. The case involved a dispute regarding the eligibility of the assessee to claim MODVAT credit on capital goods under the Central Excise Rules, 1944. The assessee, engaged in manufacturing automobile components for a specific company, availed MODVAT credit for machineries lent by that company. The issue was whether the assessee, not the owner of the capital goods, could claim MODVAT credit as per Rule 57Q of the Central Excise Rules, 1944. The Revenue contended that the assessee was not eligible for the credit as ownership was with the lending company, contrary to the Rule's requirement.

2. Another issue was the necessity of declaring ownership or type of acquisition for availing MODVAT credit. The Revenue alleged that the assessee failed to disclose crucial details about the capital goods in the declaration, as required under the Rules. The dispute arose as the assessee argued that ownership details were not mandatory for MODVAT credit relief under the Act, challenging the Revenue's penalty imposition under relevant sections of the Central Excise Act and Rules.

3. The interpretation of a 'leave and licence' agreement for MODVAT credit eligibility was a crucial aspect of the case. The Adjudicating Authority rejected the claim, emphasizing that the agreement did not align with recognized modes of acquisition for availing MODVAT credit. The Tribunal, however, considered the nature of possession under the agreement and the absence of ownership declaration. The Tribunal highlighted precedents and differences of opinion within its members, ultimately referring the matter to a Third Member for resolution.

4. The Third Member's decision aligned with a previous case involving a similar 'leave and licence' agreement for capital goods, emphasizing consistency in treatment. The Third Member's analysis drew parallels with a clarificatory letter from the Central Board of Excise and Customs, supporting the assessee's position on MODVAT credit eligibility. The Third Member's decision favored the assessee, citing precedents and clarifications, leading to the dismissal of the Revenue's appeal.

5. The judgment underscored the importance of consistency in applying legal provisions and precedents, especially concerning MODVAT credit eligibility and ownership declarations under the Central Excise Rules. The clarification from the Central Board of Excise and Customs played a significant role in determining the assessee's entitlement to the credit, ultimately leading to the dismissal of the Revenue's appeal.