Credit on capital goods is denied by the first appellate authority on the only ground that the person who has given appellant the capital goods on hire purchase or loan agreement is not a financial

M/s WIMPLAST LIMITED Vs CCE (2014-TIOL-2010-CESTAT-AHM)

Credit on capital goods is denied by the first appellate authority on the only ground that the person who has given appellant the capital goods on hire purchase or loan agreement is not a financial Company as prescribed under Rule 4(3) of the CCR, 2004 - the words used in Rule 4(3) are “even if the capital goods are acquired on lease, hire purchase or loan agreement, from a financing company”

Facts of case:

the appellant argued that CENVAT credit is denied by the first appellate authority on the only ground that the person who has given appellant the capital goods on hire purchase or loan agreement is not a financial Company as prescribed under Rule 4(3) of the Cenvat Credit Rules, 2004. Learned advocate relied upon the following case laws to argue that credit on similar facts and circumstances have been allowed by CESTAT benches including Ahmedabad:-

(a) Ilgin Automotive (P) Limited [2014 (299) ELT 129 (Mad.)]

(b) Leamak Healthcare Pvt. Limited [2010 (259) ELT 554 (Tri. Ahmd.)] = 2010-TIOL-1667-CESTAT-AHM

(c) Sharda Motors Industries Limited [2002 (150) ELT 759 (Tri. Del.)]

(d) Kalyani Seamless Tubes Limited [2004 (176) ELT 899 (Tri. Mum.)]

(e) Agro Pack [2009 (240) ELT 135 (Tri. Ahmd.)]

(f) Shree Uma Foundaries Pvt. Limited [2008 (222) ELT 317 (Tri. Kolkata) = 2007-TIOL-1759-CESTAT-KOL

Held:

It is observed from the case laws relied upon by the appellant that this Bench in the case of Leamak Healthcare Pvt. Limited has held that the words used in Rule 4(3) are even if the capital goods are acquired which does not debar Cenvat credit taken on capital goods given by a Company who is not a financing Company. Para 8 and 9 of this judgment are reproduced below:-

8. As is seen from the above, credit in respect of capital goods is available in respect of the goods received in a factory at any point of time in a given financial year, subject to the condition that the amount does not exceed 50% of the duty paid on such capital goods in the same financial year. Sub-rule (3) of Rule 4 is to the effect that the Cenvat Credit in respect of capital goods shall be allowed to a manufacturer even if the capital goods are acquired by him on lease, hire purchase or loan agreement from a financing company. The expression used even if in the said sub-rule is clearly indicative of the fact that the said sub-rule is extending the scope of availment of Modvat Credit in respect of those capital goods which are also acquired by the assessee from a financing company. The said sub-rule cannot be interpreted and read as if credit would be available in respect of capital goods only if the same are acquired from a financing company. This view is the basis for the Commissioner to arrive a finding against the assessee. It stand held by the Commissioner that inasmuch as the capital goods do not stand acquired by the assessee from a financing company, the benefit cannot be extended to them.

9. We do not agree with the above interpretation of the Commissioner. Credit is available in respect of capital goods procured by the assessee. Sub-rule 4(3) only further enlarges the scope by stating that the credit would not be disallowed even if capital goods are acquired from a 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 Modvat Credit. Interpretation adopted by the Commissioner would defeat the very legislative intent of allowing Modvat Credit in respect of capital goods.

In view of the above observations and interpretations cenvat credit was correctly availed by the appellant and appeal filed by the appellant is required to be allowed.