Case Law Details
Brief Facts of the case
The assessee is engaged in manufacture of plastic articles/components and parts by using injection moulding machines. In the present matter the moulds, used to manufacture, in this case cabinets for television sets the finished product, were supplied to the Assessee by the Original Equipment Manufacturers. The dispute relates to the years 1997-98, 1998-99.
A show cause notice issued alleging that the assessee has availed and utilized inadmissible Modvat Credit on the moulds as capital goods in contravention of Rules 57Q, 57R(3) and 57(T) of Central Excise Rule, 1944. The show cause notice has been issued for the reason that the Assessee is neither owner of the capital goods nor has it hired the same on lease, hire purchase or loan agreement from the financer.
The show cause notice was replied by the assessee, pointing out that as alleged in the show cause notice, it was not necessary that the moulds should be owned by the assessee since Rule 57Q and 57R underwent amendments after 1994.
The Commissioner passed an order in favour of the Revenue confirming the demand in the show cause notice with penalty and interest. Aggrieved by said order, assessee was in Appeal before CESTAT, Mumbai which has allowed the appeal by taking into account various decisions of the Hon’ble Supreme Court as well as this Court holding that the question which has been posed is no longer res integra, and also with reference to the decision in the case of German Remedies Ltd. V/s. Commissioner of Central Excise, Goa reported in 2002 (144) E.L.T. 606.
Held by Hon’ble High Court, Bombay
The Hon’ble high Court stated that in the present case undisputedly the 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.
Though reliance is being placed by the revenue 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 assessee if the property in capital goods continued to vest in the supplier.
The Hon’ble Court stated that 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.
In view of the above, the appeal is dismissed.
