Modvat credit under Rule 57Q excludes parts of goods under Chapter Headings 85.16 and 85.39 from eligibility.

Rule 57Q, as applicable after 1-3-1997, allowed Modvat credit on components, spares and accessories only where the underlying capital goods were covered by or specified against Sl. Nos. 1 to 4 of the Table. Goods falling under Chapter Headings 85.16 and 85.39 were expressly excluded from the capital goods covered by Sl. No. 3, so their components or parts could not be treated as eligible components, spares or accessories for credit under Sl. No. 5. The lower appellate authority's broader reading of the Table was incorrect, and such components or parts were not eligible for Modvat credit.

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Issues: Whether components or parts of goods falling under Chapter Headings 85.16 and 85.39 were eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: Rule 57Q, as applicable during the material period after 1-3-1997, allowed Modvat credit on components, spares and accessories of capital goods covered by or specified against Sl. Nos. 1 to 4 of the Table. Goods under Chapter Headings 85.16 and 85.39 were expressly excluded from the category of modvatable capital goods under Sl. No. 3. Since such goods did not fall within the class of capital goods covered by Sl. No. 3, their components or parts could not be treated as components, spares or accessories of goods covered by or specified against that entry. The lower appellate authority had misread the Table to Rule 57Q in holding otherwise.

Conclusion: The components or parts of goods falling under Chapter Headings 85.16 and 85.39 were not eligible for Modvat credit under Sl. No. 5 of the Table to Rule 57Q.

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