Modvat credit for separately manufactured coils was allowed where records showed independent supply and no proof of mere transformer repair use.

Modvat credit was treated as admissible on duty-paid raw materials used to manufacture coils supplied to an Electricity Board, because the coils were shown to be separate manufactured goods and not merely items used in transformer repair. The invoices and record supported that the coils were independently manufactured and supplied, and there was no material proving that the inputs were confined to repair work. On that basis, the denial of credit was found unjustified and the department's appeal failed.

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Issues: Whether Modvat credit was admissible on raw materials used in the manufacture of coils supplied to the Electricity Board, and whether such coils were marketable goods for the purpose of credit.

Analysis: The duty-paid nature of the coils was not in dispute. The record showed that the assessee had manufactured and supplied coils separately from the repair work relating to transformers, and the invoices supported that the coils were distinct manufactured products. In the absence of material showing that the inputs were used merely in repairing transformers, the denial of credit was not justified.

Conclusion: Modvat credit on the raw materials used in the coils was admissible. The department's appeal failed.

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