Capital goods under Modvat credit include electrical items essential to manufacturing machine function, following Jawahar Mills.

Electrical items such as contractor, switches, fuse, fuse fittings and relays used for the functioning of manufacturing machines were treated as capital goods under Rule 57Q of the Central Excise Rules, 1944. The Tribunal applied the Supreme Court's ruling in Jawahar Mills and held that goods used in relation to machines employed in manufacture can fall within the expression covering parts of machines under the Explanation to Rule 57Q. Earlier Revenue authorities' decisions contrary to that principle were regarded as no longer good law. On that basis, Modvat credit was available and the Revenue's appeal was rejected.

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Issues: Whether contractor, switches, fuse, fuse fittings and relays were eligible for Modvat credit as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The electrical items were claimed to be essential for the functioning of the machines used in manufacture and, therefore, to fall within the expression covering parts of machines under the Explanation to Rule 57Q of the Central Excise Rules, 1944. The Tribunal noted that the Supreme Court's ruling in Jawahar Mills had settled the position that goods used in relation to the machines for manufacture could qualify as capital goods, and that the earlier decisions relied on by the Revenue were no longer good law.

Conclusion: The items were held to be capital goods eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944, and the Revenue's appeal was rejected.

Ratio Decidendi: Goods which are used in relation to manufacturing machines and are necessary for their functioning can qualify as capital goods under Rule 57Q.

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