MODVAT credit on capital goods under leave and licence upheld; ownership objections and alleged suppression could not defeat the claim.

MODVAT credit on capital goods received under a leave and licence arrangement was treated as admissible where the goods were used in manufacturing and the prescribed MODVAT procedure was followed. The Court relied on contemporaneous departmental clarification and an earlier identical ruling supporting credit for a job worker, and rejected ownership-based objections to the mode of acquisition. It also held that demand and penalty could not be sustained on alleged suppression or non-disclosure of the nature of acquisition, since the same legal position had already been accepted in a similarly placed case. The Tribunal's order allowing credit was left undisturbed.

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Issues: (i) Whether MODVAT credit on capital goods received under a leave and licence arrangement was admissible. (ii) Whether the demand and penalty could be sustained on the ground of suppression and non-disclosure of the nature of acquisition.

Issue (i): Whether MODVAT credit on capital goods received under a leave and licence arrangement was admissible.

Analysis: The capital goods had been received by the assessee from another manufacturer under a leave and licence arrangement and were used in the manufacturing activity. The Court took note of the contemporaneous departmental clarification that credit of duty paid on such capital goods could be availed by the job worker if the procedure under the MODVAT scheme was followed. It also relied on the fact that the facts were identical to the earlier decision in which similar credit had been upheld. In that background, the restrictive objection based on ownership and the precise mode of acquisition was not accepted.

Conclusion: The issue was decided in favour of the assessee, and MODVAT credit was held admissible.

Issue (ii): Whether the demand and penalty could be sustained on the ground of suppression and non-disclosure of the nature of acquisition.

Analysis: The Court noted the Revenue's contention that the declaration did not disclose the ownership or the type of acquisition of the capital goods. However, in view of the departmental clarification and the acceptance of the same legal position in the similarly placed earlier case, the Court held that the Revenue could not successfully sustain its challenge on this footing. The overall record did not justify disturbing the Tribunal's order on this ground.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Final Conclusion: The Tribunal's order allowing the assessee's MODVAT credit claim was left undisturbed, and the Revenue's appeal failed in entirety.

Ratio Decidendi: Where the departmental clarification and an earlier identical ruling support availing MODVAT credit on capital goods supplied under a leave and licence arrangement to a job worker, the credit cannot be denied merely on the basis of ownership objections or alleged non-disclosure, absent a legally sustainable contrary basis.

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