Modvat credit on capital goods cannot be denied solely for non-ownership when binding Board circular permits it.

Modvat credit on capital goods could not be denied merely because the assessee was not the owner of the fixtures and jigs. The Tribunal held that Board Circular No. 263/8/89 dated 01.03.1989 allowed such credit even in cases of non-ownership, and that the circular was binding on departmental authorities. The attempt to treat the earlier Tribunal view as per incuriam and to refer the matter to a Larger Bench was rejected for want of adequate basis. Credit denial solely on non-ownership was therefore unsustainable, and Modvat credit was admissible.

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Issues: Whether Modvat credit on capital goods could be denied merely because the assessee was not the owner of the goods.

Analysis: The credit was denied only on the ground that checking fixtures and jigs & fixtures were owned by another entity. The Tribunal noted that the Board had already clarified in Circular No. 263/8/89 dated 01.03.1989 that Modvat credit on capital goods was admissible even where the assessee was not the owner. It further held that such circulars bind the departmental authorities. The request to treat the earlier Tribunal decision as per incuriam and to refer the matter to a Larger Bench was rejected, since no adequate basis was shown to displace the earlier view.

Conclusion: Denial of credit solely on the ground of non-ownership was unsustainable, and the assessee was entitled to Modvat credit.

Ratio Decidendi: Non-ownership of capital goods, by itself, is not a valid ground to deny Modvat credit where the governing Board circular permits such credit and is binding on the department.

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