Tribunal allows credit for spares in capital goods but disallows credit for unused damaged parts.

The Tribunal held that while credit for unused damaged parts was disallowed, credit for spares used in the capital goods was allowed for further manufacturing. The decision in DCW Ltd. case was distinguished. The Tribunal upheld the order, dismissing the appeal due to suppression of facts, justifying the extended period for demand. The demand was not barred by limitation, and the decision was rendered on 27/01/2017.

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Issues:
Availment of modvat credit on imported machine and spares, denial of credit by department, relevance of insurance claim, suppression of fact, limitation period for demand.

Analysis:
The case involved the appellant, engaged in manufacturing motor vehicles and parts, availing modvat credit on imported machine and spares. The imported machine was damaged in transit, requiring replacement parts imported later. The department denied credit for defective parts not used, equivalent to CVD paid on imported spares. The appellant argued for credit on both machine and spares, citing no restriction on credit for damaged capital goods and reliance on relevant case laws.

The Tribunal noted the undisputed import of capital goods for manufacturing, with damaged parts replaced by new ones. Credit was taken on CVD paid on entire machine and subsequent spares. It was held that credit for unused damaged parts was disallowed, while credit for spares used in the capital goods was allowed for further manufacturing. The decision in DCW Ltd. case was distinguished due to the repair without parts replacement. The primary condition for credit was usage in manufacturing, which damaged parts did not meet.

Regarding limitation, the Commissioner found suppression of facts by the appellant, justifying the extended period for demand. The Tribunal upheld the impugned order, dismissing the appeal due to the suppression of facts and no infirmity found in the order. The demand was deemed not hit by limitation, and the decision was pronounced in court on 27/01/2017.

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