2016 (3) TMI 127 - AT - Central Excise

Tribunal allows Cenvat Credit on leased capital goods, emphasizing acquisition source.

M/s. Jayaswal Neco Industries Ltd. Versus C.C.E. Raipur

M/s. Jayaswal Neco Industries Ltd. Versus C.C.E. Raipur - 2016 (332) E.L.T. 885 (Tri. - Del.) Issues:Cenvat Credit on capital goods acquired on lease from entities engaged in manufacturing activity - Interpretation of Rule 4(3) of Cenvat Credit Rules 2004 - Denial of credit by Revenue - Applicability of credit when capital goods are not acquired from a financing company - Allegation of ineligibility on certain steel items - Judicial precedents supporting the appellant's case.Analysis:1. Cenvat Credit on Capital Goods:The appellants, engaged in manufacturing, were availing Cenvat Credit on various capital goods acquired on lease. The Revenue sought to deny the credit, arguing that Rule 4(3) of the Cenvat Credit Rules 2004 allows credit only when capital goods are procured from a financing company. However, the appellants contended that the entities leasing the capital goods were engaged in manufacturing activities and had availed Cenvat Credit on the same without objection. The Tribunal referred to previous cases like Leamak Healthcare Pvt. Ltd. and Kalyani Seamless Tubes Ltd., where it was held that the credit should not be disallowed if capital goods are acquired from a company other than a financing company. The Tribunal found no grounds to disallow the credit availed by the appellants, setting aside the Revenue's denial.2. Allegation of Ineligibility on Steel Items:The Revenue alleged certain steel items were ineligible for credit as they were structural steel items. The appellants argued that this allegation was vague and misleading, as the original authorities did not specify the items or the amount of credit being denied. They relied on the Tribunal's decision in Mahendra & Mahendra Ltd. to emphasize that the admissibility of credit on steel structures should be determined when they are in a movable state, not forming part of immovable structures. The Tribunal found the lack of specific findings on the type and quantity of ineligible credit, making the Revenue's findings unsustainable.3. Conclusion:After hearing both sides and examining the records, the Tribunal concluded that the impugned order denying the Cenvat Credit was to be set aside. The appeal was allowed, and consequential relief, if any, was granted to the appellants. The Tribunal highlighted the settled legal position that credit should not be disallowed based on the source of acquisition of capital goods, as long as the goods were acquired on lease. The decision was made based on the interpretation of Rule 4(3) and supported by relevant judicial precedents, leading to the dismissal of the Revenue's denial of credit.4. Disposition:The impugned order was set aside, and the appeal was allowed with consequential relief. The Revenue's Counter Objection was also disposed of accordingly.