M/S. Tc Healthcare P Ltd vs Commissioner Of Central Excise
- CitationExcise Appeal No. 52579 of 2014 - Ex (SM)
Ratio decidendi
The rule this decision rests on
A manufacturer who has procured capital goods, continues to own them, retains physical possession of them in its factory, and uses them in manufacturing its final product does not lose its entitlement to Cenvat credit on those goods merely because it has recovered their cost from a foreign buyer; such recovery of cost does not, by itself, amount to a removal of the goods requiring reversal of the credit under the Cenvat Credit Rules. A decision that denies credit on the basis of loss of physical control over capital goods has no application where the assessee retains physical control and ownership of the goods and uses them in its own factory; the reversal principle applied in a case where the whole premises had been leased to a third party, and the owner had therefore parted with physical control, is distinguishable and does not govern such a case.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
[Arising out of Order-In-Appeal No. GZB-EXCUS-000-APP-241 dated 28.02.2014 passed by Commissioner of Central Excise (Appeals), Ghaziabad ]
For approval and signature:
Honble Mr Ashok Jindal, Member (Judicial)
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. TC Healthcare P Ltd. Appellants
Vs.
Commissioner of Central Excise Respondent
Ghaziabad
Appearance:
Shri Rajesh Chibber, Advocate for the Appellants
Shri G R Singh, AR for the Respondent
CORAM:
Hon'ble Shri Ashok Jindal, Member (Judicial)
Date of Hearing /decision: 1.5.2015
FINAL ORDER NO. A/ 51627/2015-Ex(SM)
Per Ashok Jindal :
The appellants is in appeal against the impugned order wherein Cenvat credit is denied to the capital goods used in their factory.
2. The brief facts of the case are that the appellant is manufacturer of pharmaceuticals products. During the course of manufacture of their goods, they procured certain capital goods. The cost of the goods was borrowed by the foreign buyers. The audit was conducted at the premises of appellant, as the appellant has recovered cost of capital goods from foreign buyers, the show cause notice was issued to the appellant to pay duty on the scrap cleared from the factory. The show cause notice was replied by the appellant that they have not sold any scrap but they have recovered cost of the capital goods from the foreign buyers. In these set of facts, proceedings were initiated against the appellant by the adjudicating authority. On adjudication, Revenue has taken a view that as the appellant has recovered the cost of capital goods from the foreign buyers, they are required to reverse the Cenvat credit as per Rule 3(5) of Cenvat Credit Rules, 2004. Learned Commissioner (Appeals) has already held that as the cost of capital goods has been recovered from the foreign buyers, therefore appellant has lost physical control of goods. Therefore, Cenvat credit is rightly denied by the authority. Against that order appellant is before me.
3. Learned Counsel for the appellant has submitted that capital goods are in their factory and they are using the same for manufacture of final product. They have recovered the cost of capital goods for contribution in manufacture of final product on behalf of foreign buyers. But the capital goods has been procured by them and same are in the factory and therefore, they are not required to reverse the Cenvat credit.
4. On the other hand, learned AR opposed the arguments of the learned Counsel and submits that although capital goods are in physical control of the appellant but as per the decision of Honble High Court of Karnataka in the case of CCE, Belgaum vs. Associated Cement Co. Ltd. [2009 (236) ELT 240 (Kar)], the appellants are required to reverse the Cenvat credit.
5. Heard the parties. Considered the submissions.
6. In this case, it is not in dispute that capital goods have been procured by the appellant and are still lying in their factory and are being used by the appellant themselves for manufacturing the final product. The only objection of the Revenue is that appellant has recovered the cost of the capital goods from their foreign buyers, therefore, they have lost the ownership of the capital goods, consequently, the Cenvat credit is required to be reversed by the appellant as they had removed the goods as such from the factory. In this case, the facts are not like as the Revenue alleged. The decision in the case of Associated Cement Co Ltd. (supra) are also not relevant to this case as in that case whole of the premises was given to the lease holder of the premises, therefore, the person who has given the lease to the lease holder, is the buyer of the capital goods in that case, in those circumstances, the Honble High Court came to the conclusion that when the respondent was not having physical control over goods, they are not entitled to take Cenvat credit and are required to reverse the Cenvat credit availed on the capital goods. Admittedly, this is the not the case here. Infact appellant is still using these capital goods in their factory and moreover the owner of the capital goods. Therefore, I hold that appellant has correctly taken the Cenvat credit and not required to reverse the Cenvat credit.
7. In these terms, the impugned order is set aside. Appeal is allowed with consequential relief, if any.
(Dictated and pronounced in the open court )
( Ashok Jindal ) Member(Judicial)
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