Modvat credit on accessories supplied with drilling rigs was admissible when their value formed part of the assessable value.

Modvat credit was admissible on drill rods, pipes, drill bits and similar accessories purchased from the open market and supplied with drilling rigs because Rule 57A(i)(e) covered accessories cleared along with the final product where their value was included in the assessable value. The fact that the items were not integral parts of the rigs did not by itself defeat credit eligibility. Since the accessories were supplied with the rigs and their value formed part of the final product's assessable value, the duty paid on those goods fell within the rule. The denial of credit was therefore incorrect, and consequential relief followed on the credit issue.

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Issues: Whether Modvat credit was admissible on drill rods/pipes, drill bits and similar accessories purchased from the open market and supplied along with drilling rigs when their value was included in the assessable value of the final product.

Analysis: Rule 57A(i)(e) permitted credit in respect of accessories of the final product cleared along with the final product, where the value of such accessories was included in the assessable value of the final product. The earlier finding that the impugned items were not parts of the drilling rigs did not decide the separate question of Modvat eligibility. Since the accessories were supplied with the drilling rigs and their value was included in the value of the final product, the credit represented the duty paid on those goods and was within the scope of the rule.

Conclusion: Modvat credit was admissible and the denial of credit was incorrect.

Final Conclusion: The appeal succeeded and the assessee obtained consequential relief on the credit issue.

Ratio Decidendi: Where accessories are cleared along with the final product and their value forms part of the assessable value, Modvat credit is admissible on the duty paid on such accessories even if they are not integral parts of the final product.

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