Modvat credit on repair charges of capital goods allowed when repaired goods return under valid duty-paying invoice and are reused in manufacture.

Duty paid on repair charges of capital goods was treated as eligible Modvat credit where the repaired boiler was received back under a valid duty-paying invoice and reused in the manufacture of final products. The invoice was accepted as a duty-paying document under Rule 57G of the Central Excise Rules, 1944, and the factual use of the repaired capital goods in the factory satisfied Rule 57Q. On those facts, credit was admissible and the Revenue's challenge failed.

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Issues: Whether Modvat credit was admissible on duty paid on repair charges of capital goods repaired outside the factory and received back under a duty-paying invoice for use in the manufacture of final products.

Analysis: The repaired boiler was cleared by the job worker under a regular invoice evidencing payment of duty on the labour charges. That invoice constituted a duty-paying document acceptable under Rule 57G of the Central Excise Rules, 1944. The duty paid was treated as duty paid on capital goods, and the capital goods were undisputedly used again in the assessee's factory for manufacture of final products. On these facts, the conditions of Rule 57Q of the Central Excise Rules, 1944 were satisfied.

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

Ratio Decidendi: Duty paid on repair charges of capital goods is eligible for Modvat credit under Rule 57Q where the repaired goods are received under a valid duty-paying invoice and are used in the manufacture of final products.

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