Modvat credit on conveyor parts upheld where Chapter 84 goods and their components fell within the capital goods definition.

Amended Rule 57Q treated all goods falling under Chapter 84, except expressly excluded headings, as capital goods for Modvat credit from 23-07-1996. Heading 84.28 was not excluded, so conveyors classified under that heading were covered by the definition. The inclusive clause also extended eligibility to components, spares and accessories of the specified goods. On that basis, parts of conveyors used in the factory were within the scope of capital goods eligible for Modvat credit, and the contrary disallowance was unsustainable.

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Issues: Whether parts of conveyors used in the factory were eligible capital goods for Modvat credit under Rule 57Q of the Central Excise Rules, 1944, as amended.

Analysis: The amended Rule 57Q included within the expression "capital goods" all goods falling under Chapter 84, other than those in specifically excluded headings, with effect from 23-07-1996. Heading 84.28 was not among the excluded headings, so conveyors classifiable under that heading were covered by the definition. Clause (d) of Explanation (1) further extended eligibility to components, spares and accessories of the goods specified in clauses (a) to (c). Since the goods in dispute were admittedly parts of conveyors used in the factory, they fell within the extended scope of capital goods eligible for Modvat credit. The contrary view taken by the lower authorities was inconsistent with the express provision of law.

Conclusion: The parts of conveyor were eligible capital goods for Modvat credit and the disallowance of credit was unsustainable.

Final Conclusion: The assessee succeeded in its challenge and the credit was held admissible.

Ratio Decidendi: Where the principal machinery falls within the specified chapter-heading based definition of capital goods, its components, spares and accessories are also eligible for Modvat credit under the inclusive provision.

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