Modvat credit on factory machinery upheld under the 1998 capital goods definition; earlier narrower precedents were distinguished.

Modvat credit on a lathe machine, welding machine, drilling machine and lighting arrestor was held admissible as capital goods for July-August 1998 under Rule 57Q because the applicable definition then covered specified goods used in the factory of manufacture and the goods fell within the relevant tariff headings in the rule's table. Earlier Revenue decisions were distinguished as arising under a narrower definition that required a different test for machinery and plant, making them inapplicable to the period in question. The Revenue's challenge therefore failed.

---

---

Issues: Whether Modvat credit was admissible on lathe machine, welding machine, drilling machine and lighting arrestor as capital goods under Rule 57Q for the relevant period.

Analysis: The entitlement turned on the definition of capital goods applicable during July-August 1998. For that period, the rule covered specified goods used in the factory of manufacture, and the Revenue did not dispute that the goods in question fell within the relevant tariff headings included in the table under Rule 57Q. The earlier decisions relied upon by the Revenue concerned a different and narrower definition of capital goods, under which machinery and plant had to satisfy a different test. That distinction made those decisions inapplicable to the present period.

Conclusion: Modvat credit on the disputed goods was admissible and the Revenue's challenge failed.

---