Capital goods credit confirmed for essential plant and storage tanks; lease from a non-finance company did not bar eligibility.

Capital goods credit was treated as admissible for a nitrogen gas plant used to generate an essential consumable input for manufacture, because the plant was integral to production. Credit could not be denied merely because the equipment was taken on lease from a person other than a finance company, as the lease condition was not read so narrowly. Storage tanks were also treated as eligible capital goods, and defects in declarations or invoices were regarded as procedural lapses that could attract penalty but not defeat credit where substantive eligibility was established.

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Issues: (i) whether credit on the nitrogen gas plant, used as an essential input in manufacture, was admissible as capital goods credit; (ii) whether credit could be denied because the lease arrangement was not with a finance company; (iii) whether credit on storage tanks and related documents could be denied for procedural defects in declaration and invoices.

Issue (i): Whether credit on the nitrogen gas plant, used as an essential input in manufacture, was admissible as capital goods credit.

Analysis: The nitrogen gas was found to be vital to the manufacturing process and indispensable for production of the final product. Capital goods producing such essential consumable input were treated as eligible for credit, and there was no basis to deny credit merely because the plant produced nitrogen gas used captively in manufacture.

Conclusion: Credit on the nitrogen gas plant was admissible and the objection was rejected.

Issue (ii): Whether credit could be denied because the lease arrangement was not with a finance company.

Analysis: The relevant rule was read as applying where goods are taken on lease from a finance company. It was held that the provision could not be stretched to mean that capital goods leased from any person other than a finance company automatically become ineligible. Since the lease agreement was available and the objection was only on the identity of the lessor, the denial of credit was unsustainable.

Conclusion: Credit could not be denied on the ground that the lease was not from a finance company.

Issue (iii): Whether credit on storage tanks and related documents could be denied for procedural defects in declaration and invoices.

Analysis: Storage tanks were treated as components essential to the nitrogen plant and therefore as eligible capital goods. The defects relating to declaration particulars and absence of pre-printed serial numbers on invoices were treated as procedural lapses, for which penalty could be imposed, but credit could not be denied when the substantive eligibility was established.

Conclusion: Credit on storage tanks was admissible and the procedural objections did not warrant denial of credit.

Final Conclusion: The assessee's entitlement to credit was upheld on all material grounds, and the revenue's challenge failed.

Ratio Decidendi: Credit on capital goods cannot be denied merely because the goods are leased from a non-finance company or because of procedural defects, where the goods are otherwise shown to be essential and eligible under the capital goods provision.

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