CENVAT credit on leased capital goods allowed where the plant was used in the manufacturer's factory for dutiable production.

CENVAT credit on capital goods could not be denied merely because an oxygen plant was taken on lease from a non-financing company. Rule 2(b) of the Cenvat Credit Rules, 2001/2002 required the capital goods to be used in the manufacturer's factory, and that condition was satisfied because the plant was installed in the appellant's factory, received under excise invoices in the appellant's name, duty was paid, and the oxygen produced was captively consumed in the manufacture of dutiable final products. Ownership of the plant was not a prerequisite for credit, and the lease arrangement did not defeat eligibility. The denial of credit was therefore unsustainable.

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Issues: Whether CENVAT credit on capital goods could be denied merely because the oxygen plant was taken on lease from a non-financing company and the appellant was not the owner of the plant.

Analysis: Rule 2(b) of the Cenvat Credit Rules, 2001/2002 requires capital goods to be used in the factory of the manufacturer of the final products. The plant was installed in the appellant's factory, the equipment was received under central excise invoices in the appellant's name, duty was paid thereon, and the oxygen produced was captively consumed in the manufacture of dutiable final products. The lease arrangement and operation by Praxair did not alter the fact that the capital goods were received and used in the factory for eligible manufacture. Ownership of the capital goods was not a for availing credit, and denial of credit on the ground that the lessor was not a financing company was not sustainable.

Conclusion: The appellant was entitled to the CENVAT credit and the denial of credit was incorrect.

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