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of <h1>Tribunal grants Modvat credit for duty paid spares used in CNC system</h1> <h3>HEG. LTD. Versus COMMISSIONER OF C. EX., BHOPAL</h3> HEG. LTD. Versus COMMISSIONER OF C. EX., BHOPAL - 2008 (226) E.L.T. 111 (Tri. - Del.) Issues:Alleged irregular Modvat credit availed by the appellants on duty paid accessories for CNC machines supplied by M/s. HMT Ltd.Analysis:The case involved the appellants, engaged in manufacturing Graphite Electrodes, facing allegations of irregularly availing Modvat credit of Rs. 2,69,280 on duty paid accessories for CNC machines supplied by M/s. HMT Ltd. The dispute arose when the appellants received repaired CNC machines from HMT, utilizing fresh duty paid accessories, and claimed credit based on duty paying documents. The adjudicating authority disallowed the credit and imposed penalties, a decision upheld by the Commissioner (Appeals).The advocate for the appellants contended that credit was rightfully availed on duty paid spares used in the CNC system, supported by invoices and purchase orders. Citing a precedent from the Punjab & Haryana High Court, the advocate argued that as the duty paid spares were used in the manufacturing process, the credit should not be denied. The Revenue, represented by the DR, maintained that as the appellants received repaired CNC machines, not the original accessories, they were not entitled to credit.Upon review, it was established that M/s. HMT Ltd. returned CNC machines to the appellants after paying duty on fresh spare inputs used in the machines, confirming that the credit was rightfully availed on the received spares. The Tribunal referenced the Punjab & Haryana High Court case to support the appellants' position. The Tribunal found no dispute that the duty paid spares were used in the CNC system and received by the appellants, rejecting the Revenue's objection regarding the receipt of old CNC machines. Consequently, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellants.In conclusion, the judgment clarified that the appellants were entitled to the Modvat credit on duty paid spares used in the CNC system, as supported by invoices and used in the manufacturing process. The decision highlighted the importance of actual usage of duty paid items in production, dismissing objections based on the form of the received machinery.
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