CENVAT credit on moulds and dies cannot be denied for lack of ownership, and denial of hearing vitiates adjudication.

Under the CENVAT Credit Rules, 2004, credit on moulds and dies could not be denied merely because the assessee did not purchase or own the capital goods, since the Rules require receipt and compliance with prescribed conditions, not ownership. Credit reversals made on return of the goods to the OEMs also supported compliance with the reversal requirement. The adjudication order was further unsustainable because the assessee was not afforded an effective personal hearing despite appearing and seeking another date, amounting to breach of natural justice. The demand and penalty were therefore set aside in favour of the assessee.

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Issues: (i) Whether CENVAT credit could be denied on moulds and dies received from OEMs merely because the appellants had not purchased or owned the capital goods; and (ii) whether the adjudication order was vitiated for breach of natural justice.

Issue (i): Whether CENVAT credit could be denied on moulds and dies received from OEMs merely because the appellants had not purchased or owned the capital goods.

Analysis: The scheme of the CENVAT Credit Rules, 2004 requires receipt of eligible inputs or capital goods in the factory and compliance with the prescribed conditions. The Rules do not impose any requirement that capital goods must be purchased by the assessee or that ownership is a precondition for taking credit. The record also showed that credit was reversed whenever the moulds and dies were returned to the OEMs, which aligned with the reversal requirement on removal of such goods as such. The contrary reliance on an erstwhile provision was held inapplicable to the current rules.

Conclusion: The denial of credit on the ground of non-ownership was not sustainable and is held against the Revenue.

Issue (ii): Whether the adjudication order was vitiated for breach of natural justice.

Analysis: The appellants demonstrated that personal hearing was not effectively afforded despite their appearance on the fixed dates and their written request for a fresh date. The adjudicating authority also did not take cognizance of the later communication seeking intimation of the next hearing date. On these facts, the order was passed without proper observance of the opportunity of hearing.

Conclusion: The adjudication order was vitiated for violation of the principles of natural justice and is held against the Revenue.

Final Conclusion: The demand and penalty could not be sustained, and the impugned order was set aside with relief in favour of the assessee.

Ratio Decidendi: Under the CENVAT Credit Rules, 2004, ownership or prior purchase of capital goods is not a prerequisite for availing credit if the goods are received and dealt with in accordance with the Rules, and an adjudication passed without effective opportunity of hearing is unsustainable.

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