TaxTMI 
TaxTMI 
2008 (5) TMI 180
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.... vide impugned order, has disallowed Cenvat credit of Rs. 6,81,14,176/- for the period from December, 2000 to June, 2001. He also demanded interest on the same and imposed equivalent penalty of Rs. 6,81,14,176/-. 2. Heard both sides and perused the records. 3. The facts of the case are that when the appellants clear transformer-from their factory, they are paying excise duty as follows : (i) They are paying excise duty on the actual cost of transformer; (ii) They are paying excise duty in respect of the spare parts manufactured in their factory; (iii) They are treating the bought out spares as if manufactured in their factory and paying excise duty on the same under the transaction value procedure. There is no denial of th....
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....ave availed the Cenvat Credit on the bought out items used in the manufacture of transformer. However, certain bought out items were cleared as spares over and above the ones used in the manufacture of transformers for taking care of any unforeseen break down of the transformer at the customers' end so as to get the transformer functioning in minimal time in case of break down of the same. Although no manufacturing activity is carried out on such spares except repacking and repacking in this case is not an act of manufacturing, yet the fact remains that at the time of clearance, these have suffered duty. 8. The Department cannot blow hot and cold at the same time. Having collected the duty on the spares sold as such at the time of their ....
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....57C. The Department accordingly proceeded to deny, and recover the Modvat credit taken on the inputs. The Tribunal after considering the issue held that the utilization of the Modvat credit for the payment of duty. on the final product, which is treated by the Department as exempt from payment of duty, has to be treated as reversal of the Modvat credit. The relevant portion of this decision is as under : "4……. I, however, find that the disputed Modvat credit amount has been utilized only for payment of duty on the very goods, which are held to be eligible for exemption. Disallowing of wrongly taken Modvat credit can be effectuated either by reversing the credit if available in the RG 23 A Part II account or by recovery of the sum sep....
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....processes undertaken by the assessee did not amount to manufacture. The Tribunal dismissed the Department's appeal on the ground that the duty paid by way of the debit in the Modvat account should be treated as the reversal of the inadmissible credit taken and, therefore, no demand would lie. 13. The following case laws lay down that when the process is held to be not manufacture, then the duty paid on the final product should be treated as reversal of the ineligible credit on the inputs and the assessee cannot be called upon to pay the credit :- (i) Singh Scrap Processors Ltd. v. CCE - 2002 (143) E.L.T. 619 (T) (ii) PSL Holdings Ltd. v. CCE - 2003 (156) E.L.T. 602 (T) (iii) Vinayak Industries v. CCE - 2003 (159) E.L.T. 456 (T) ....