Modvat credit on generating sets used in the factory cannot be denied merely because of capacity.

Rule 57Q was applied to allow Modvat credit on a 40 KVA generating set used in the factory of the manufacturer. The relevant entry in Explanation 1(c) to Rule 57Q(1) expressly covered generating sets, and the Tribunal held that capacity alone was not a disqualifying factor. Relying on its earlier view that a 30 KVA transformer was also eligible on the same principle, the Tribunal confirmed that credit could not be denied merely because the generating set had a specified capacity. The departmental challenge therefore failed.

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Issues: Whether Modvat credit was admissible on a generating set of 40 KVA capacity under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The relevant entry in Explanation 1(c) to Rule 57Q(1) covered generating sets used in the factory of the manufacturer. The capacity of the generating set was not treated as a disqualifying factor. The Tribunal also followed its earlier view that a transformer of 30 KVA capacity was eligible for Modvat credit on the same principle. On that basis, no infirmity was found in the appellate order allowing credit.

Conclusion: Modvat credit on the 40 KVA generating set was admissible, and the departmental challenge failed.

Ratio Decidendi: Where the statutory entry expressly covers generating sets used in the factory, Modvat credit cannot be denied merely because of the capacity of the generating set.

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