M/S. Jayaswal Neco Industries Ltd vs C.C.E. Raipur

[Arising out of Order-in-Appeal No. Commissioner/RPR/49/2010 dated 30.07.2010 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Raipur].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. Jayaswal Neco Industries Ltd. .Appellants

Vs.

C.C.E. Raipur .Respondent

.

Appearance:

Shri B.L. Narsimhan, Advocate for the Appellant

Shri Pramod Kumar, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

Date of Hearing: 11.08.2015

FINAL ORDER NO. 52592/2015-EX(DB)

Per B. Ravichandran:

The appellants are engaged in the manufacture of sponge iron, Pig iron, billets etc. liable to Central Excise Duty. They were availing Cenvat Credit on inputs, inputs services and capital goods. After an audit of their records the Revenue proceeded against the appellant to deny the credit taken on various capital goods acquired by them on lease. The credit was sought to be denied on the ground that in terms of Rule 4 by Cenvat Credit Rules 2004 only when the capital goods are received by the manufacturer on lease from a financial company such credit is admissible. Since the entities from whom the appellant received the said capital goods are engaged in industrial activity and cannot be called as financing company, the Cenvat Credit is not admissible. In these set of facts, proceedings were initiated resulting in the impugned order. Aggrieved from the said order the appellant is before us.

2. The appellant pleaded that the two units who supplied capital goods on lease basis have on original procurement availed Cenvat Credit on these various capital goods which has not been objected to by the Department. There is no pending issue on such availment of credit by these two units. They have acquired these capital goods on lease and Rule 4 (3) cannot be read to mean that such lease should be only from finance company. They have relied on the following case laws in their support:

1) Leamak Healthcare Pvt. Ltd. Vs. CCE Goa-2010 (259) ELT 554 (Tri-Amd).

2) Wimplast Ltd. Vs. CCE Daman-2014 (310) ELT 886 (Tri-Amd)

3) CCE Pune Vs. Kalyani Seamless Tubes Ltd.-2004 (176) ELT 899 (Tri-Mum).

3. It was contended by the Ld. Counsel for the appellant there is no dispute regarding credit originally taken by the two units who later leased these capital goods to the appellant. The denial of credit now only on the grounds that the lease is from other than financing company is legally untenable. Regarding the original authorities finding on certain credit being ineligible on the grounds some materials are structural steel items the allegation is vague and misleading. The Ld. Counsel for the appellant contended that it is an additional point raised by the original authorities without reference to specific details and the exact amount sought to be denied on the said grounds. He also relied on the Tribunals decision in the case of Mahendra & Mahendra Ltd. Vs. CCE-2005 (190) ELT 301 (LB) to contend that the dutiability as well as admissibility of credit on various steel structures are to be decided at the stage when the iron and steel items are in a movable state and have not formed part of the immovable supporting structures. In any case the absence of specific finding either on the type of ineligible capital goods or the quantity of ineligible credit, the findings cannot be sustained.

4. Ld. AR reiterated the findings of the lower authorities and held that the provisions of Rule 4(3) will apply only when the capital goods are acquired from a financing company.

5. Heard both the sides and examined the records.

6. The main point for decision is as to whether Cenvat Credit availed by the appellant on various capital goods acquired on lease basis from other two entities involved in manufacturing activity is correctly taken or not. The Revenues contention is that in terms of Rule 4(3) Cenvat Credit in respect of capital goods shall be allowed to a manufacturer if the capital goods are procured on lease, hire purchase or loan agreement from a financing company. Since the persons who leased out these capital goods in the present case are not admittedly, finance companies, the credit is not available. We have noted that this matter has come up for decision in a few cases before this Tribunal. In the case of Leamak Healthcare Pvt. Ltd. (Supra) the Tribunal held that the Rule 4(3) only further enlarges scope by stating that the credit would not be disallowed even if capital goods are cleared from the financing company. It does not mean that the capital goods must be acquired from a financing company and any other acquisition of capital goods from the company who is not a financing company will disentitle the availment of credit. The Tribunal held that the interpretation adopted by the Revenue would defeat the very legislative intent of allowing credit in respect of capital goods. Similar findings were recorded earlier in the case of Kalyani Seamless Tubes Ltd. (Supra). Considering the above settled position we find no ground for disallowing the credit availed by the appellant in respect of capital goods taken on lease. Regarding denial of credit on certain items of structural steel on the grounds that they do not fall under the definition of capital goods, we find that no categorical finding with specific items and quantum of credit attributable to such items have been made. Considering the credit on these items have already been availed by the units who have later leased them out to the appellant, we find no justification for the observation by the original authorities on these aspects.

Considering the above discussion and case law held on the issue, we find that the impugned order is to be set aside.

7. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any. The C.O. filed by Revenue is also disposed of.

(Dictated and pronounced in the open court)

(B. Ravichandran) (Ashok Jindal) Member (Technical) Member (Judicial)

Bhanu

5

E/3528/2010-EX(DB)