Capital goods test under Modvat allows credit for equipment required in manufacturing, even without direct production function.

Duty paid on an oven and an ultrasonic cleaner was treated as admissible Modvat credit under Rule 57Q because capital goods need not directly produce or process the final product if they are required in the factory for manufacture. Since their use in connection with manufacture was not disputed, they fell within the description of capital goods and were eligible for credit.

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Issues: Whether the duty paid on an oven and an ultrasonic cleaner was admissible as Modvat credit under Rule 57Q as capital goods.

Analysis: Goods need not themselves directly produce or process goods, or bring about a change in the substance of the final product, if they are nevertheless required in the factory for manufacture of the final product. On the facts recorded, the necessity of the oven and ultrasonic cleaner in connection with manufacture was not disputed. In that situation, they answered the description of capital goods for the purposes of Rule 57Q.

Conclusion: The oven and ultrasonic cleaner were held eligible for Modvat credit.

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