Modvat credit for furnace components allowed where functional use, not tariff heading, determined eligibility.

Copper wire ropes used as part of a furnace were treated as eligible for Modvat credit under Rule 57Q because eligibility depended on functional use as a component of specified capital goods, not merely on the item's tariff classification. The Board circular was noted to clarify that components, spares and accessories of specified capital goods qualified for credit irrespective of their own heading, and the same position was stated to apply even before the amendment. On the facts, the ropes were regarded as part of the furnace under Chapter 84.17, so credit was allowed and the assessee succeeded.

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Issues: Whether copper wire ropes used as a part of the furnace were eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944 despite their tariff classification.

Analysis: The dispute turned on whether eligibility for credit under Rule 57Q depended solely on the tariff heading of the item or on its functional use as a component of specified capital goods. The Board circular clarified that, after the amendment, components, spares and accessories of specified capital goods qualified for credit irrespective of their own classification, and the same position applied even prior to the amendment. On the facts, the item was treated as part of the furnace falling under Chapter 84.17, and therefore as a qualifying component of capital goods.

Conclusion: The item was held eligible for Modvat credit, and the appeal was allowed in favour of the assessee.

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