Capital goods for Modvat credit under Rule 57Q extended to plant auxiliaries used in manufacture; Revenue's challenge failed.

Items used as integral components or auxiliaries of plant and machinery in manufacturing operations, including chlorine blowing, brine processing, cooling and steam-related functions, were treated as capital goods for Modvat credit under Rule 57Q. The Revenue's objection that the goods did not directly produce or process final products was rejected because the rule extends to goods covered by its explanation when used in relation to manufacture. Relying on the Supreme Court's governing principle on the scope of capital goods, the items were held eligible for Modvat credit and the Revenue's appeal failed.

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Issues: Whether the items used in the manufacturing process were eligible as capital goods for Modvat credit under Rule 57Q.

Analysis: The items in question were found to be integral components or auxiliaries of plant and machinery used in the manufacturing operations, such as chlorine blowing, brine processing, cooling and steam-related functions. The Revenue's objection that they did not directly produce or process goods was rejected, as Rule 57Q extends to goods properly covered by the explanation to the rule when they are used in relation to manufacture. The conclusion was supported by the governing principle laid down by the Supreme Court on the scope of capital goods under Modvat.

Conclusion: The items were held to be capital goods eligible for Modvat credit under Rule 57Q, and the Revenue's appeal failed.

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