2006 (1) TMI 324 - AT - Central Excise

Summary

Issues:
Denial of Modvat credit on DPC wires used in manufacturing coils for old transformers repaired and cleared without duty payment.

Analysis:
The appeal considered the denial of Modvat credit on DPC wires used by the manufacturer in manufacturing coils for old transformers repaired without payment of duty. The manufacturer availed Modvat credit on DPC wires converted into coils used in both new and repaired transformers. While duty was paid on new transformers, no duty was paid on repaired transformers, but duty was paid on the copper coil manufactured from duty-paid DPC coil. The department issued a show cause notice for denial of Modvat credit, which was confirmed by the adjudicating and appellate authorities.

The advocate for the appellants argued that the issue was about the denial of Modvat credit, contending that they discharged duty liability on coils used in repairing transformers, even if not considered as duty payment. He relied on a Tribunal decision in Garha Containers v. CCE, Gwalior. On the other hand, the Department argued that duty was not required on coils as they were not manufactured items, and thus, Modvat credit on DPC wire used for coils was not eligible. The Department cited the case of CCE, Indore v. Gwalior Electrical Industries.

The Tribunal found that the appellants had indeed discharged duty on coils used in repairing transformers, and the dispute centered on Modvat credit on DPC used for coils. The Tribunal referenced a Supreme Court judgment in CCE & C (Appeals), Ahmedabad v. Narain Polyplast, stating that the issue was technical with no revenue implication. Additionally, a Division Bench decision in Garha Containers case supported the appellants' position.

The Tribunal noted that even if duty on coils was not required, reversing the duty paid credit on DPC wire would be unjust. Referring to the Gwalior Electrical Industries case, the Tribunal highlighted that charging duty again on DPC wire used in repairing old transformers would amount to double taxation, contrary to the law. Consequently, the impugned order was set aside, and the appeals were allowed with any consequential relief.

This detailed analysis of the judgment showcases the considerations made regarding the denial of Modvat credit on DPC wires used in manufacturing coils for old transformers repaired and cleared without payment of duty. The legal arguments, precedents cited, and the Tribunal's findings provide a comprehensive overview of the case and the reasoning behind the decision.