Modvat credit on testing equipment allowed where cable testing was integral to manufacture; Revenue's challenge failed.

Modvat credit was held available on Automatic Cable Test Equipment used to test jelly filled telephone cables because testing formed an integral part of the manufacturing process. The tribunal treated the equipment as eligible capital goods even before the 16-3-95 change in the definition, and rejected the Revenue's appeal.

---

---

Issues: Whether Automatic Cable Test Equipment used for mandatory testing of jelly filled telephone cables qualified for Modvat credit under Rule 57Q of the Central Excise Rules, including for the period prior to 16-3-95.

Analysis: The equipment was duty paid and was used for testing at different stages of manufacture. The test results were required for supply to the Department of Communication, the buyer of the cables. In the context of jelly filled cables, such testing formed an integral part of the manufacturing process and was not merely a post-manufacture activity. The later change in the definition of capital goods from 16-3-95 only reinforced the position, but the benefit was available even for the earlier period on the facts of the case.

Conclusion: The equipment was eligible for Modvat credit even prior to 16-3-95, and the Revenue's appeal was rejected.

---