ORDER
P.G. Chacko, Member (J)
1. Modvat/Cenvat Credit of Rs. 1,26,80,343/- was denied to the appellants for the period September, 1999 to January, 2002 in respect of capital goods which were supplied by their customer viz. M/s. Hyundai Motors (India) Ltd. (HMIL, for short). The capital goods supplied by M/s. HMIL were used by the appellants for the manufacture of automobile components ordered by the customer but the ownership of the said capital goods remained with the customer. The above credit of the duty paid on the capital goods was taken by the appellants during the aforesaid period under Rule 57S of the Central Excise Rules, 1944 and Rule 57AB(1)(b) of the Central Excise Rules, 2000. In a show-cause notice dated 25.2.2003, which invoked the extended period of limitation under Section 11A of the Central Excise Act, the department proposed to disallow the above credit to the appellants and also to impose penalty on them. In their reply to the notice, the appellants relied on the Tribunal’s decision in Sharda Motors Industries Ltd. v. Commissioner 2002 (51) RLT 33 (CEGAT-Del.) as well as the Board’s Circular No. 263/8/89-CX. dt. 1.3.1989 and claimed that the legal issue arising in their case was already covered in their favour by the cited decision and circular. On the question of limitation, they submitted that the ownership of the capital goods was not a criterion for availment of credit and, therefore, the extended period of limitation was not liable to be invoked against them on the ground that the ownership of the goods by M/s. HMIL was suppressed by them. Ld.Commissioner of Central Excise (adjudicating authority) rejected these contentions and confirmed the demand of Rs. 1,26,80,343/- against the appellants and imposed on them a penalty of equal amount. Hence the present appeal.
2. Heard both sides. Ld.Counsel for the appellants submitted that the credit in question had been disallowed on the sole ground that the ownership of the capital goods remained with the supplier viz. M/s.HMIL. It was argued that the ownership of the goods was irrelevant to availment of credit. Reliance was placed on the Tribunal’s decision in Sharda Motor Industries (supra) as well as on the Board’s Circular dated 1.3.89 (supra). Ld.Counsel also relied on Order No. 142/2004 dt. 13.2.2004 passed by this Bench in the case of Iljin Automotive Pvt. Ltd v. Commissioner (Appeal No. E/180/2002). Ld.SDR reiterated the findings of the adjudicating authority.
3. After considering the submissions, we find that the adjudicating authority framed the following two issues in the case:
(i) Whether or not ownership of capital goods is an essential condition in order to enable the assessee to avail MODVAT/CENVAT credit in terms of Rule 57Q or Rule 57AB, as the case may be, of the Central Excise Rules, 1944.
(ii) Whether or not the demand invoking the extended period in terms of proviso to Section 11A of the Central Excise Act, 1944 is justified.
While dealing with the first issue, ld.Commissioner distinguished the Board’s circular by observing that the circular dealt with input duty credit and did not deal with the capital goods credit. As regards the Tribunal’s decision in Sharda Motor Industries (supra), he noted that the department had not accepted the said decision and had filed a reference application in the Delhi High Court which was said to be pending. It appears that, even according to the adjudicating authority, the above issue stood covered in favour of the appellants by the Tribunal’s decision in Sharda Motor Industries (supra). Pendency of any reference application of the department against the said decision before the High Court does not work as stay of operation of the said decision. We, further, note that the Board’s circular dt. 1.3.89, which had clarified that Modvat credit facilities would be available in the case of purchase as well as stock transfer of inputs and, accordingly, input duty credit was available on goods given for job work, was considered by the Bench in the case of Sharda Motor Industries (supra). The Bench, further, took note of the fact that the Board had subsequently clarified through letters issued to M/s.Maruti Udyog Ltd. and M/s.Telco that Modvat credit could be taken in respect of “jigs and moulds” (capital goods) sent to job worker. These clarifications of the Board were relied on by the Tribunal, in Sharda Motor Industries (supra), to hold that the appellant in that case was entitled to avail Modvat credit on capital goods received for job work for M/s.HMIL. We find that the decision in Sharda Motor Industries (supra) was followed by this Bench in the case of Iljin Automative (supra), wherein capital goods credit was allowed to the party in respect of machinery received from M/s.HMIL and utilized for the job work of manufacture of automobile components for M/s.HMIL. We find that the facts of Iljin Automative case are similar to those of the instant case.
4. Following the cited decisions, we allow the Modvat/Cenvat credit in question, to the appellants. The limitation issue is now irrelevant.
5. The impugned order is set aside and this appeal is allowed.
(Operative part of the order was pronounced in open court on 12.4.2005)