Capital goods eligibility for Modvat credit denied for EPABX and factory lighting used only for communication and illumination.

EPABX systems and lighting lamps and fittings used only for internal communication and illumination within a factory were not treated as capital goods for Modvat credit because they did not produce or process goods, nor bring about any change in a substance used in manufacture. Applying the governing eligibility test for capital goods, the Tribunal held that the items failed the statutory requirement for Modvat credit and the appeal was unsuccessful.

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Issues: Whether EPABX system and lighting lamps and fittings were capital goods eligible for Modvat credit.

Analysis: The items in question were found to be used only as a communication system within the factory and for lighting the area, and not for producing or processing any goods or for bringing about any change in a substance used in manufacture. On that basis, and following the governing ratio on capital goods eligibility, the Tribunal held that the items did not satisfy the requirement for Modvat credit.

Conclusion: The items were not capital goods eligible for Modvat credit, and the appeal failed.

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