Modvat credit on capital goods used in another unit denied where the machinery did not serve the claimant unit's final product

Modvat credit under Rule 57Q was confined to capital goods used in the unit for producing or processing goods or bringing about a change in the substance used for the final products of that unit. A packing machine used in the cement unit and a rotary air valve used there were not capital goods for the clinker unit in which credit was claimed. Separate registration of the two units did not extend eligibility to machinery used in a different unit. Credit was therefore not admissible on either item in the clinker unit.

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Issues: Whether Modvat credit under Rule 57Q of the Central Excise Rules, 1944 was admissible on a packing machine and a rotary air valve when those goods were used in a different unit of the assessee from the unit in which credit was taken.

Analysis: Credit under the capital goods provision was available only for machinery used for producing or processing goods or for bringing about a change in any substance for the manufacture of the final products of the unit concerned. The unit in which credit was claimed manufactured clinker, while the packing machine was used for packing cement and the rotary air valve was used in the cement unit. Since those items were not used for the final product of the clinker unit, they did not satisfy the definition of capital goods for that unit. The separate registration of the two units did not make the machinery eligible in the clinker unit.

Conclusion: Modvat credit was not admissible to the assessee on either item in the clinker unit.

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