ORDER
P.G. Chacko, Member (J)
1. Examined the records and heard both the sides.
The appellants are engaged in the manufacture of VP sugar and molasses. One of their capital goods is Fibrizer Rotor Assembly. This item was sent to a job worker for the purpose of repairs and, on completion of the job work, it was returned to the appellants by the job worker on payment of duty amounting to Rs. 88,400/- under Invoice No. 339, dated 13-10-98 issued under Rule 52A of the Central Excise Rules, 1944. The appellants took Modvat credit of this amount of duty under Rule 57Q on 31-12-98, which was objected to by the Department, who issued a show cause notice to the appellants proposing to disallow the credit on the ground that no new capital goods had been received by the appellants under cover of the above invoice and further that the benefit of Modvat credit under Rule 57Q was not available in respect of duty paid on labour/repairing charges. The notice also proposed to impose penalty on the appellants. These proposals were contested. The adjudicating authority disallowed the Modvat credit to the appellants and imposed on them a penalty of Rs. 10,000/-. The aggrieved party preferred appeal to the Commissioner (Appeals), but the latter upheld the decision of the lower authority. Hence the present appeal.
2. The learned Counsel for the appellants submits that the credit in question was taken strictly in terms of Rule 57Q. Undisputedly, it was taken on capital goods on the strength of Rule 52A invoice which evidenced payment of duty on the goods by the supplier thereof. The allegation in the show cause notice that the supplier had paid duty on labour charges only is not correct. Duty had been paid on the total value comprising the value of the goods and the job charges. At the end of the supplier (job worker), the Department has considered the activity undertaken by the job worker as “manufacture” and has accordingly calculated Central Excise duty on the total value including the labour charges. At the appellants’ end, they were entitled to take Modvat credit of this duty under Rule 57Q and they did so.
3. These arguments are opposed by the DR, who submits that the benefit of Modvat credit under Rule 57Q, at the material time, was not available to old/used capital goods nor was credit permissible in respect of duty paid on labour charges. There was no ‘manufacture’ involved in the repair works undertaken by the job worker. In this connection, the learned DR refers to the Tribunal’s decision in the case of East India Transformers and Switchgears [1989 (43) E.L.T. 561 read with 1990 (47) E.L.T. 442]. In the cited case, which was also relied on by the adjudicating authority, it was held that replacement of transformer oil or change of minor parts would not amount to manufacture and, therefore, the assessee was not liable to pay duty. It was further held that no duty was payable on labour charges. No credit of any amount of such duty paid by the job worker, in the instant case, could be validly taken by the appellants.
4. I have examined the submissions. The subject credit was taken in December, 1998 when Rule 57Q allowed Modvat credit on specified categories of capital goods on the basis of their tariff classification. In the present case, the show cause notice did not propose to deny Modvat credit to the appellants on any such ground. The only allegation in the show cause notice was that Modvat credit under Rule 57Q was not available to old capital goods, nor in respect of duty paid on labour charges. I have not been able to pinpoint anything in the erstwhile Modvat scheme which would be a basis for such allegation. In the instant case, admittedly, the capital goods which was got repaired in the premises of job worker was cleared to the appellants on payment of appropriate duty (Rs. 88,400 at the rate of 13% on a total assessable value of Rs. 6,80,000/-). Such clearance was under invoice issued under Rule 52A by the job worker. A copy of this document is available on record and the same indicates that duty was paid not only on the labour charges but also on the value of the goods. The benefit of this payment went to the Revenue. What the appellants have done is to take credit of this duty, within the statutory period of limitation, on the strength of the invoice, which was a valid document for the purpose at the material time. The Department, in insisting on payment of duty by the job worker, recognized his activity as manufacture. Therefore, it is not open to the Revenue to rely on the decisions cited by the DR. The legality or otherwise of payment of duty by the job worker is not any concern of the appellants. As far as the appellants are concerned, they have taken Modvat credit of the duty paid on the capital goods received by them under a valid document and used in the manufacture of final product. This action is in accordance with law. I am, therefore, unable to sustain the impugned order. The impugned order is set aside and the appeal is allowed.