Modvat credit on packing materials treated as components under the amended capital goods rule; other items disallowed.

Modvat credit under the capital goods scheme was allowed only for packing materials used in machine joints to prevent leakage, because they were treated as components within the amended scope of Rule 57Q effective from 1-3-97. The remaining disputed items were not covered by that rule and therefore did not qualify as capital goods for credit. Credit was consequently sustained only for the packing material, while denial on the other items was upheld.

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Issues: Whether Modvat credit under the capital goods scheme was admissible on the disputed packing materials as components, and whether credit could be sustained on the remaining items.

Analysis: The dispute concerned denial of credit on several items claimed as capital goods. The decision turned on the scope of Rule 57Q after the amendment with effect from 1-3-97. The packing materials used in the joints of machines to prevent leakage were treated as components and, therefore, fell within the amended entry covering components. The remaining items were not found to be covered by the rule and did not qualify for credit.

Conclusion: Credit was admissible only on the packing material, and the denial of credit on the remaining items was upheld.

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