Functional nexus with manufacturing process qualified computer hardware as capital goods under Rule 57Q.

Computer hardware system used with a ZEISS 3D co-ordinate measuring machine was treated as capital goods for Modvat purposes because it was integrally connected with the manufacturing process and used in connection with the measuring equipment. The relevant test applied was functional nexus with production, not merely standalone use. On the facts, the hardware was accepted as part of the equipment employed in manufacture and therefore qualified for the benefit under Rule 57Q of the Central Excise Rules, 1944, with consequential relief following.

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Issues: Whether computer hardware system used with a ZEISS 3D co-ordinate measuring machine was eligible as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The item was used in connection with the measuring machine and was asserted to be necessary for the manufacturing process. The relevant test was whether the item was used in a manner integrally connected with production so as to fall within the expression capital goods for Modvat purposes. On the facts, the item was accepted as part of the equipment used in the manufacturing process and as qualifying for the benefit of Rule 57Q.

Conclusion: The computer hardware system was held to be eligible capital goods under Rule 57Q of the Central Excise Rules, 1944, and the appeal succeeded with consequential relief.

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