Capital goods treatment under Modvat credit extends to plant items integrally connected with manufacturing operations.

Fibre glass insulator used in the plant for ducts carrying cold humidified air and on the false roofing of the factory building was treated as capital goods under Rule 57Q because its use was integrally connected with the manufacturing process. The contention that it was neither a component, part or accessory of machinery nor used in manufacture was rejected. Modvat credit was therefore admissible, and the Revenue challenge failed, leaving the order allowing credit undisturbed.

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Issues: Whether Modvat credit on fibre glass insulator used in the manufacturing setup was admissible as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The item was used in the plant for ducts carrying cold humidified air and on the false roofing of the plant building. The claimed use was therefore connected with the manufacturing process. The contention that it was neither a component, part or accessory of machinery nor used in manufacture was rejected, the use being covered by the principle laid down for capital goods in manufacturing operations.

Conclusion: Modvat credit was held admissible and the Revenue challenge failed.

Final Conclusion: The appeal was rejected, leaving the order allowing credit in favour of the respondent undisturbed.

Ratio Decidendi: Goods used in the plant and integrally connected with the manufacturing process can qualify as capital goods for Modvat credit under Rule 57Q.

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