Modvat credit exclusion for compressor spare parts used in air-conditioning machinery was applied, making the credit claim inadmissible.

Modvat credit on spare parts of air compressors used in an air-conditioner plant was treated as unavailable because Rule 57Q and Heading 84.14 excluded compressors and air-conditioner machinery from capital goods coverage. The items claimed were spare parts of compressors, and they were used in air-conditioning machinery without any shown special-purpose use taking them outside the exclusion. On that reasoning, the credit claim was held inadmissible and the revenue's challenge succeeded.

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Issues: Whether Modvat credit was admissible on spare parts of air compressors used in air-conditioner plant and machinery in view of the exclusion under Rule 57Q and Heading 84.14 of the Central Excise Tariff Act.

Analysis: The items for which credit was claimed were spare parts of compressors. The relevant table appended to Rule 57Q specifically excluded compressors falling under Heading 84.14 and air-conditioner machinery from the purview of capital goods. The compressors were used for air-conditioner plant and machinery and were not shown to be for any special purpose that would take them outside the exclusion. On that basis, the claimed Modvat credit was not legally available.

Conclusion: Modvat credit on the goods in question was inadmissible and the revenue's challenge succeeded.

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