2002 (9) TMI 778 - AT - Central Excise

Summary

Issues:
Appeal against allowing Modvat credit on electric motors under Rule 57Q for specific periods.

Analysis:
The appeal pertains to the allowance of Modvat credit to the respondents on certain parts of electric motors under Rule 57Q for the periods of November 1998 and April 1999. The respondents had initially procured electric motors from a specific company for their manufacturing units. Subsequently, in the mentioned periods, these motors were sent back to the original supplier company for the replacement of certain parts and repair works. The company returned the motors to the respondents with invoices showing excise duty paid on the replaced parts. The department objected to the credit taken by the respondents, amounting to Rs. 1,26,640, on the grounds that the parts were not physically brought into the assessee's factory. The adjudicating authority confirmed the demand for duty under Rule 57U and imposed a penalty equal to the duty amount. The Commissioner (Appeals) allowed the appeal by the assessee, leading to the present appeal by the Revenue.

The Revenue contended that the parts of the motors were not brought into the assessee's factory as required under Rule 57S(7). The Revenue argued that the motors were sent for repair directly to the original supplier, who then returned the repaired motors with replaced parts to the factory, which, according to the Revenue, was not in compliance with the relevant rules. On the other hand, the respondents argued that they only took credit for the duty paid on the replaced parts as per the invoices issued by the supplier, in accordance with Rule 57Q. The respondents emphasized their entitlement to Modvat credit under Sl. No. 5 of the Table annexed to Rule 57Q(1).

The Commissioner (Appeals) had found that the respondents had indeed sent the motors for repairs and received them back with replaced parts under proper invoices issued by the supplier, as per Rule 57S(7). The Commissioner further confirmed that duty was paid only on the replaced parts, and the respondents rightfully took credit for that duty. The Commissioner's decision was based on the eligibility of the replaced parts for Modvat credit under Rule 57Q, as amended by a specific notification. The Commissioner's detailed reasoning, as provided in Para 10 of the order, highlighted the eligibility of the replaced parts under the relevant provisions. The Tribunal, after examining the provisions of Rule 57Q, concurred with the Commissioner's decision and found no valid ground to overturn it, ultimately rejecting the appeal by the Revenue.