The Assessee is engaged in manufacture of plastic articles/components and parts by using injection moulding machines. In the present matter the moulds, used to manufacture, in this case cabinets for television sets the finished product, were supplied to the Assessee by the Original Equipment Manufacturers. A show cause notice (“SCN”) issued alleging that the assessee has availed and utilized inadmissible CENVAT Credit on the moulds as capital goods in contravention of erstwhile Rules 57Q, 57R(3) and 57(T) of Central Excise Rule, 1944. The SCN has been issued for the reason that the Assessee is neither owner of the capital goods nor has it hired the same on lease, hire purchase or loan agreement from the financer. In replying the SCN, Assessee pointing out that as alleged in the SCN, it was not necessary that the moulds should be owned by the Assessee since Rule 57Q and 57R underwent amendments after 1994.

The Commissioner passed an order in favour of the Revenue confirming the demand in the SCN with penalty and interest. Aggrieved by said order, Assessee was in Appeal before CESTAT, Mumbai which has allowed the appeal. Hence, the present appeal filed by the Department before the Hon’ble Bombay High Court.

Held by Hon’ble High Court, Bombay

The Hon’ble Court stated that after 1994, sub rule 3 of Rule 57R having under gone amendment to it, removed such requirement of ownership/acquisition from financing agency. For taking credit of duty paid on said goods, it would not be necessary that the capital goods shall either be owned by the assessee or those shall be acquired by finance from financing agency. Denial of credit based on such ground is unsustainable.

In view of the above, the appeal of the Department is dismissed.

[Commissioner of Central Excise v. M/s. Modernova Plastyles Pvt. Ltd. Central Excise Appeal No. 27 of 2004; dated February 16, 2015]