TaxTMI 
TaxTMI 
2009 (1) TMI 520
X X X X Extracts X X X X
X X X X Extracts X X X X
....hese purchases, invoices were in the assessee's name. Assessee also imported capital goods from foreign countries and got those cleared from the customs by filing bills of entry and paying the duties thereon. The assessee availed Modvat credits of Central Excise duties paid on the indigenous capital good and countervailing (additional) duties paid on the imported capital goods. The total Modvat credit taken by the assessee on the said capital goods is to the extent of Rs. 68,27,831,24/-. A show cause notice was issued to the assessee, inter alia, alleging that the foresaid credits were taken without satisfying the procedure provided under Rule 57R(3) of the Central Excise Rules, 1944 and the assessee was required to show cause as to why the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IBI, which are covered by the expression "financing company" as used in Rule 57R(3) of the Rules and accordingly, set aside the order of the Commissioner (Appeals). 4. Assessee thereafter has preferred this application under Section 35G of the Central Excise Act, 1944. 5. By order dated 5-5-2004, this Court had directed the Customs, Excise and Gold (Control) Appellate Tribunal to refer the following questions of law : "1. Whether on a true and correct interpretation of the provision relating to allow ability of Modvat credit on capital goods, the Tribunal was correct in law in holding that the procedure under Rule 57R(3) of the Central Excise Rules, 1944 has to be followed irrespective of as to whether the assessee i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eement, the financing company would be the owner and the term agreement with the banks is not with specific reference to the capital goods. To support his contention that in case of hypothecation of the capital goods, assessee shall not be ceased to be the owner of the capital goods and, as such, the provisions of Rule 57R(3) of the Rules shall not be attracted, placed reliance on a judgment of the Gujarat High Court in the case of Bank of Baroda, Ahmedabad v. Rabari Bachubhai Hirabhai and Others [AIR 1987 Gujarat 1] and our attention has been drawn to the following passage from paragraph 6 of the said judgment, which reads as follows : "The hypothecating Bank, a creditor, had merely advanced a loan against the security of that vehicle a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....attracted in case the capital goods have been brought under a financial arrangement for financing the cost of the same. 10. Having appreciated the rival submission, I do not find any substances in the submission of Mr. Khaitan and the authority relied on in no way supports his contention. It is not dispute that the assessee has entered into a financial arrangement with the banks for financing the cost of capital goods. In my opinion, hypothecation of the machine does not change the ownership of the capital goods to the lender inasmuch as hypothecation is only as security for repayment of loan within a time frame. When the loan is not returned within the time stipulated, the ownership is transferred from the borrower to the lender in....