TaxTMI 
TaxTMI 
2002 (4) TMI 140
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....entirely used for the manufacture of formulations which were exported under bond in terms of Rule 13 of the Central Excise Rules; that the Commissioner of Central Excise, under the impugned order, disallowed the capital goods credit on the ground that M/s. Madaus had delivered the capital goods to the appellants on bailment agreement and hence the capital goods were acquired by them on lease basis; that the appellants ought to have resorted to the provisions of Rule 57R(3) and as the procedure under the said rule had not been followed, Modvat credit cannot be allowed. 2.2 The learned Advocates, further, submitted that since they have satisfied all the conditions under Modvat Rules, Modvat credit on the capital goods cannot be denied; that all the capital goods in question are falling within the description of capital goods as given in Column (2) of the table below Rule 57Q(1) and all the formulations manufactured by them had been cleared for export under bond; that such clearance for export cannot be equated with full exemption as held in Reliance Industries Ltd. v. C.C.E., 1995 (78) E.L.T. 595 (T); that no claim for depreciation under Section 32 of the Income-tax Act, 1961 or und....
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....causes manufacture; that the ownership of the goods has no relevance for duty liability of the final product; that the Rule 57R(3) as it stands now does not have the explicit condition that the capital goods should be owned by the manufacturer of the final product, that apparently, Rule 57R(3) is not the only situation dealing with acquisition of capital goods by a manufacturer of the final product. Reliance has been placed on the decision in the case of Ballarpur Industries Ltd. v. C.C.E., Belgaum - 2000 (116) E.L.T. 312 (T) wherein it was held by the Larger Bench of the Appellate Tribunal that "Rule 57D(2) stipulates that credit of specified duty allowed in respect of any input 'shall not be denied or varied' on the ground that an exempted intermediate product has come into existence during the manufacture of a final product". This expression cannot be equated with the expression "Credit shall be allowed only on the ground mentioned in the sub-rule". "Rules 57A and 57B are the rules relating to allowing of credit...... To our minds. Rule 57D(2) does not set out the condition precedent for extending Modvat credit to an assessee. Non-fulfilment condition of Rule 57D(2) cannot resu....
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....at Commissioner (Appeals), Chennai, under Order-in-Appeal No. 54/98, dt. 30-3-98 has allowed the appeal holding that "the Modvat credit need not be given on sale of goods. It could be given on transfer, or otherwise;" that Commissioner (Appeals) held that Rule 57R(3) covers hire- purchase, lease, or under loan. 3.5 The learned Advocate also submitted that the demand for Modvat credit taken in March, 1998, show cause notice dated 4-12-1998 is barred by limitation since there is no suppression of facts; that the invoices based on which they had taken credit had been filed with the Department along with R.T. 12 Returns; that the fact they were shown as consignee A/c Madaus and not as purchaser was clear from the invoice; that the case against them was initiated only on the scrutiny of the invoices given by them which is evident from the Superintendent's letter dated 26-7-1998 asking them to clarify as to what role M/s. Madaus had played in procurement of capital goods; that penalty under Rule 57U(6) is imposable only in case of suppression of facts; that in any case penalty is imposable, if any, only if the credit has been utilized by them; that even as per the impugned order (intern....
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....upon which a question before a Court has been decided is alone binding as a precedent.......If it is not clear, it is not the duty of the Court to spell it out with difficulty in order to be bound by it." 5.1 Countering the arguments, Shri A.K. Jain, learned DR, submitted that Rule 57Q of the Central Excise Rules is not the only Rule for availing of Modvat credit of the duly paid on capital goods; that the said Rules deals with the "applicability" of capital goods credit only; that sub-rule (1) specifies the capital goods in respect of which Modvat credits can be availed of; that sub-rule (2) of Rule 57Q specifies the types of duties in respect of which the credit shall be allowed to the manufacturer; that it is the provision contained in sub-rule (3) of Rule 57R which provides for the availment of credit in respect of capital goods; that according to this sub-rule the credit of the duty shall be allowed if the capital goods are acquired by the manufacturer on lease, hire-purchase or loan agreement; that the said sub-rule (3) clearly and specifically provides as to when the credit shall be allowed; that as the appellants have not acquired the capital goods in the present matter as....
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.... as found, upon which the decision is based. The Supreme Court, in the case of Krishena Kumar, observed that the ratio decidendi has to be ascertained by an analysis of the facts of case and the process of reasoning involving the major premise consisting of pre-existing rule of law and minor premise consisting of materials facts of the case. Court, therefore, observed that "if it is not clear, it is not the duty of the Court to spell out with difficulty in order to be bound by it." We agree with the submission of the learned advocates that there is no ratio decidendi in the decision in the case of Terene Fibres as both the Hon'ble Member have come, no doubt, to a common conclusion but via diametrically opposite routes. The learned Advocates have rightly pointed out that as per the decision of the learned Member (Technical) it is not relevant as to who had purchased the capital goods, where as according the learned Member (Judicial ) a person who gets property absolutely, certain benefit are derived by him, under Rule 57R(3) and the person who gets limited titles or put it in leasehold acquisition of the goods in a limited way is not entitled to the benefit of Modvat. In our view th....
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....nt of specified duty along with a copy of the agreement entered into by him with the said financing company; or (b) for financing the cost of such capital goods including the specified duty, shall produce a certificate from the financing company to the effect that the duty specified on such capital goods has been paid by the said manufacturer to such financing company, prior to payment of first lease rental installment or first hire-purchase installment or first installment of re-payment of loan, as the case may be, along with a copy of the agreement entered into with the said financing company. (iii) The manufacturer and the financing company shall not claim depreciation under the income-tax laws on that part of the value of capital goods which represents the amount of specified duty paid on such capital goods. (iv) The relevant documents required for the purpose of availing credit of the specified duty paid on such capital goods under Rule 57T shall bear the name of the manufacturer along with that of the financing company." 9. Modvat credit of the duty paid on capital goods was allowed to take away the cascadi....
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....rictions that may be specified in the notification. However the substituted Rule did not put a condition that Modvat credit shall be allowed only in those cases where the goods are acquired either by way of lease, hire-purchase or loan agreement nor it provided that the manufacturer availing credit should have the property in the capital goods transferred in his name. Sub-rule (3) will be applicable only in case where manufacturer acquires the capital goods in any manner as specified therein. We are strengthened in our view by the decision of the Larger Bench of the Tribunal in the case of Ballarpur Industries wherein it was held that "Rule 57D(2) is required to be fulfilled only by a person who wants to claim benefit under that rule and if an assessee can otherwise establish that Modvat credit is available according to the other provisions of the rules, he cannot be denied credit on the ground of non-fulfilment of the condition of Rule 57D(2)," we further observe that similar views were shared by the department which is evident from Bombay Collectorates Trade Notice No. 53/94, dt. 22-7-94 wherein it was clarified that "following conditions and restrictions are laid down which shal....