Modvat credit for computers and peripherals used in automated manufacturing upheld as integral production inputs.

Computers and peripherals used as part of an automated manufacturing system were treated as eligible inputs for Modvat credit because they performed an integral functional role in the production process and their value formed part of the final product. On that basis, they were not merely accessories, and denial of credit was held unsustainable. The assessee was therefore entitled to Modvat credit under Rule 57A.

---

---

Issues: Whether computers and peripherals used in the manufacture process were eligible inputs for availing Modvat credit under Rule 57A.

Analysis: The computers and peripherals were found to be an integral part of the automated manufacturing system used in HPCL operations. The reasoning accepted that the equipment performed a functional role in the process and that its value was included in the value of the final product. In these circumstances, the items could not be treated merely as accessories so as to deny credit.

Conclusion: The denial of Modvat credit was unsustainable, and the computers and peripherals were eligible inputs. The assessee succeeded.

---