Modvat/CENVAT credit on duty-paid moulds cannot be denied merely for lack of ownership after the 1994 amendment.

After the 1994 amendment to Rule 57R of the Central Excise Rules, Modvat/CENVAT credit on duty-paid capital goods could not be denied merely because the assessee was not the owner or had not acquired the goods on lease or hire purchase. The earlier ownership-linked restriction under the pre-amendment regime was no longer preserved as a general requirement. Where the statutory conditions for availment were otherwise satisfied and the moulds were duty-paid capital goods used in manufacture, credit remained admissible. The article therefore states that absence of ownership by itself was not a valid ground to refuse credit.

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Issues: Whether Modvat/CENVAT credit on moulds used as capital goods could be denied merely because the assessee was not the owner and had not purchased them on lease or hire purchase.

Analysis: The dispute turned on the effect of Rule 57Q and Rule 57R of the Central Excise Rules, 1944 before and after the 1994 amendment. Under the earlier regime, credit was restricted where the capital goods were acquired otherwise than by direct purchase and ownership remained with another. After amendment, Rule 57R(3) specifically dealt with credit in cases of lease, hire purchase or loan from a financing company, and the Court held that the amended scheme no longer preserved a general requirement that the capital goods must be owned by the assessee. It was undisputed that the moulds were duty paid capital goods supplied by the original manufacturer and used in manufacture. In that setting, denial of credit solely on the ground of absence of ownership was not justified.

Conclusion: Credit could not be denied merely because the moulds were not owned or directly purchased by the assessee; the assessee was entitled to Modvat/CENVAT credit.

Ratio Decidendi: After the 1994 amendment to Rule 57R, Modvat/CENVAT credit on duty-paid capital goods cannot be refused merely for want of ownership, where the statutory conditions for availment are otherwise satisfied.

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