ORDER
Moheb Ali M., Member (T)
1. The Revenue is in appeal against the order of the Commissioner of Central Excise & Customs (Appeals). In the impugned order, the Commissioner (Appeals) upheld the order of the lower authority who dropped the proceedings initiated against the respondents for denying Modvat credit on washing machines. The Commissioner concluded that since the respondents paid duty on reconditioned washing machine credit of duty taken on machines gets neutralized. The Ld. SDR contended that the respondents sought permission to bring duty paid washing machines for trading purpose under Rule 51 of Central Excise. This permission has been granted. The respondents thereafter imported washing machine and paid duty and brought them into their factory obviously for filling some more inputs in it to make it marketable. The Department’s contention is that the respondents availed of credit of duty paid on these machines even though no process of manufacture had taken place when those machines were cleared from the factory. Permission was sought for and obtained by the respondents only to bring duty paid machines for trading purposes.
2. Heard both sides.
3. The Ld. Counsel for the respondents pleaded that what was imported were not finished washing machines, as reflected in the description given in Bills of Entry; that the respondents undertook certain operations on the washing machines which resulted in the manufacture of new product; that while clearing the washing machines duty has been paid; that in any case the action on the part of respondents resulted in taking excess credit of Rs. 10,639.02 (Rupees Ten thousand six hundred thirty nine and paise two only) and at best the dispute could only be in respect of this amount.
4. We have carefully considered the rival contentions. We observe that the respondents have sought permission to bring into factory duty paid washing machines. This was granted by the Department under Rule 51A. It was never their contention that the washing machines will be brought into the factory for conducting operations which amount to manufacture. The respondents also applied for permission under Rule 173H of the Central Excise Rules, which provides for bringing duty paid goods for repairs etc into the factory. In both these rules, under Rules 51A as well as under Rule 173H, no manufacture is involved and therefore, the respondents are not entitled to take modvat credit on duty paid washing machines. However, while removing the machines from their factory, the respondents paid central excise duty, as if the machine was manufactured by them. This, in a way of neutralized the effect of taking credit. However, the facts remains that the respondents took credit, which was not due. Entire credit needs to reversed but for the fact that the respondents reversed it by paying duty on the machines at the time of their clearance.
5. We, therefore, remand the matter back to the original authority to verify the quantum of credit taken and duties paid on machines and off set one against the other and confirm the balance duty, which is to be paid; or Modvat credit to be reversed. The appeal is thus allowed by way of remand.