Modvat credit on repaired capital goods allowed despite duty on repair and labour components.

Modvat credit on repaired and reconditioned capital goods was found admissible where the supplier discharged excise duty on the full value, including material cost, repair charges and labour charges. The Tribunal accepted that the duty-paid value of manufactured goods could legitimately include those components and that credit could not be denied merely because the duty incidence covered repair and labour charges. It also treated the issue as covered by an earlier Tribunal ruling recognising credit on a reimported repaired machine as eligible capital goods under Rule 57Q read with Notification No. 6/97-C.E. (N.T.).

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Issues: Whether Modvat credit was admissible on repaired and reconditioned capital goods, notwithstanding that duty had been paid on the material cost as well as repair and labour charges.

Analysis: The capital goods were sent for repair and received back after reconditioning, and the supplier had discharged excise duty on the total value including material cost, repair charges and labour charges. The Tribunal accepted the view that duty paid value of manufactured goods includes such components and that credit cannot be denied merely because the duty incidence also covered repair and labour charges. The matter was held to be covered by the earlier Tribunal decision recognising credit on a reimported repaired machine as eligible capital goods under Rule 57Q read with Notification No. 6/97-C.E. (N.T.).

Conclusion: Modvat credit was held admissible and the Revenue's challenge failed.

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