Customs, Excise and Gold Tribunal - Calcutta
Cce, Patna vs M/S. Lumbini Beverages Pvt. Ltd. on 12 January, 2001
Equivalent citations: 2001(75)ECC149, 2001(135)ELT938(TRI-KOLKATA)
ORDER
Smt. Archana Wadhwa
1. Being aggrieved with the order passed by the Commissioner(Appeals) vide which he has set aside the order-in-original of Deputy Commissioner denying the benefit of modvat credit of Rs.68,27,831/-, the Revenue has filed the present appeal.
2. After hearing both the sides duly represented by Shri V.K.Chaturvedi, ld.SDR for the Revenue and Shri P.S.Mahapatra, ld.adv. along with Shri M.S.Dey, ld.adv. it is seen that the modvat credit was denied by the Asstt.Commissioner on different grounds. One of the ground was that though the respondent had filed the requisite declaration under rule 57T in the office of the Asstt.Commissioner, they had taken the credit without awaiting the dated acknowledgement required to be issued by the Asstt.Commissioner. We find that the Tribunal, in a number of cases has held that the date of filing of declaration in the office of the Asstt.Commissioner under a proper receipt amounts to obtaining dated acknowledgement and no separate acknowledgement is required. As such no infirmity is found in this part of the order of the Commissioner(Appeals).
3. A portion of the modvat credit has been denied to the appellants on the ground that they had entered into loan agreement with two major financial institution i.e. the banks, for the establishment of the plant. The Deputy Commissioner has gone into the terms and conditions of the loan agreement entered into by the appellants with their bankers and has observed that the loan is secured 'by a first charge by way of hypothecation in favour of the lenders of all borrowers movables, including movable machinery, spares, tools and accessories'. As such it has been held by the original adjudicating authority that since the capital goods were required by the respondents on loan agreement, the conditions of rule 57R(3) would be applicable. Inasmuch as the respondents have not followed the procedure as envisaged under rule 57R(3), they are not entitled to the modvat credit of duty paid on such capital goods. On appeal against the above order Commissioner(Appeals) observed that the respondents have taken loan from Banks and as the expression used in the rule is 'Financial company', the respondents would not be covered by the provisions of the said rule. He has further held that financial company means an institution registered under the Companies Act, 1956 and inasmuch as IDBI and IIBI are not registered under the Companies Act, being banks, loan taken from them will not be covered by the provisions of the said rule.
4. After giving our careful consideration to the above reasoning of the adjudication authority, we do not find ourselves in agreement with the same. Rule 57R(3) allowes credit of specified duty paid on the capital goods to a manufacturer, if the capital goods are acquired by the loan agreement from a financing company subject to the procedure envisaged therein. The fact that the loan has been taken from the banks is not disputed. The question which arises is as to whether the expression 'Financing Company' occurring in the said rule has to be interpreted in a sense that the same would apply to a company registered under the Companies Act or the same would cover in its ambit any institution which finances the purchase of the capital goods. The said expression has not been defined anywhere in the rules. However, a reading of the said rule reflects upon the fact that the essence of the same is that where the capital goods are acquired by the assessees on lease, hire purchase or loan agreement from another institution or person financing the capital goods, the procedure is required to be followed. The expression financing company is not to be interpreted in a narrow sense so as to limit the same to a company which is registered under the Companies Act and engaged in financing the transactions. Here the financing company is intended to mean a financing institution, be it bank or an individual or a partnership firm or any other institution. The emphasis is that the assessee has himself not purchased the goods with his own money, but has purchased the same by arranging the finance from outside either under lease or hire purchase or loan agreement. As such we do not agree with the finding of the Commissioner(Appeals) that since banks are not companies registered under the Companies Act, the loan agreement entered into between them and the respondent would not be covered by the provision of rule 57R(3). The above also becomes clear from a reading of the procedural conditions required to be followed under the said rule. condition required to be followed under the said rule. Condition ii(a) of the said rule requires the manufacturer availing credit of duty paid on the capital goods who had entered into a financial arrangement, for financing the cost of such capital goods, to produce a copy of the invoice evidencing payment of specified duty along with a copy of the agreement entered into by him with the said financing company and sub-rule ii(b) requires production of a certificate from the financing company to the effect that duties specified on such capital goods has been paid by the said manufacturer to such financing company, prior to payment of first instalment of re-payment of loan. As such we hold that the provision of rule 57R(3) are required to be followed even where the capital goods are acquired by the assessees under a loan agreement from the banks.
The Commissioner(Appeals) has adopted another reasoning to the effect that hypothecation of the machines to the lender does not shift the ownership of the capital goods to the lender inasmuch as hypothecation is only as security for repayment of loan within a time frame. If loan is not returned within that time frame and if there is a clause like this, only then the ownership transfers from borrower to lender. We afraid that we do not support the above reasoning of the appellate authority. The provisions of rule 57R(3) nowhere talk about or lay emphasis on the ownership of the goods. The same requires the assessee to follow the procedure as per the said rule, in case the capital goods have been bought under a financial arrangement for financing the cost of the same. Inasmuch as admittedly the respondents have entered into a financial arrangement with the banks for financing the cost of such capital goods, the respondents were required to follow the procedure of rule 57R(3).
5. The third allegation is that the invoices on the basis of which the respondents have taken the credit are not proper modvatable invoices inasmuch as some of them are not in the assessees' own name, some of them bear the rubber stamp of first stage dealer, instead of the same being pre-printed and some of them are torn without identity of consignor or consignee. The Commissioner(Appeals) has allowed the credit by observing that these are all procedural lapses and should not come in the way of the respondents availing the substantive benefit of modvat credit. It is seen that the appellants have already reversed the amount of credit availed by them on the basis of the invoices which were not in their own name. As regards the rubber stamping it is seen that both the markings i.e. first stage dealer and second stage dealer are appearing in the invoices and wherever necessary, one of them has been scrapped and the other has been permanently marked with rubber stamp. We agree with the findings of the Commissioner(Appeals) that such rubber stamping should not debar the assessee from claiming the modvat credit. However, the Deputy Commissioner has also observed that five of the invoices were without identity of consignor or consignee. If that be so, it is not understood how the credit can be availed by the assessee. The same cannot be held to be a case of procedural lapse. Such invoices are required to be looked into further and the factum of payment of duty by the appellants on the capital goods covered by such invoices is required to be established.
6. In view of our foregoing discussions, we set aside the impugned order and remand the matter to the Asstt.Commissioner for fresh adjudication and resultant quantification of demand of duty based upon the findings given by us in the preceding paragraphs.