Capital goods credit for machinery parts: tool bits and screeners qualified as eligible inputs under the pre-1996 Modvat rule.

Rule 57Q(1) of the Central Excise Rules, 1944, as it stood before 1-7-96, allowed Modvat credit on parts, components and accessories of plant, machinery and equipment used in the factory for producing or processing goods or bringing about a change in a substance for manufacture. Tool bits and screeners, being parts of machinery used in the manufacturing process, satisfied that statutory description. The exclusion relied on by the lower authorities did not override the main eligibility provision, so the items qualified as capital goods for credit.

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Issues: Whether tool bits and screeners, being parts of machinery used in manufacture, were eligible for capital goods credit under Rule 57Q(1) of the Central Excise Rules, 1944 as it stood prior to 1-7-96.

Analysis: Rule 57Q(1), as applicable before 1-7-96, allowed Modvat credit on parts, components and accessories of plant, machine, machinery, equipment and appliances used in the factory for producing or processing goods or for bringing about any change in any substance for manufacture of the final product. The exclusion relied upon by the lower authorities did not alter the broader eligibility under the main provision. Since the items in question were parts of equipment used in the manufacturing process, they satisfied the statutory requirement for capital goods credit.

Conclusion: The appellants were entitled to Modvat credit on the tool bits and screeners.

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