Capital goods credit under Rule 57Q survives broad manufacturing nexus test and cannot be denied for delayed declaration.

Under the pre-amendment Rule 57Q regime, machines, machinery, plant, equipment, apparatus, tools and appliances used in producing or processing goods, or in bringing about a change in a substance for manufacture, qualified as capital goods. Applying the larger bench ruling in Jawahar Mills, the listed items were treated as eligible despite objections that they lacked direct manufacture nexus. Applying Kamakhya Steels, otherwise admissible Modvat credit could not be denied merely because the declaration was filed late. The operative result is that capital goods credit was available on the disputed items and the departmental objections failed.

---

---

Issues: Whether the listed items were eligible for capital goods credit under Rule 57Q, and whether credit could be denied solely because the Modvat declaration was filed belatedly.

Analysis: The items received before 23-7-96 fell within the then prevailing scope of Rule 57Q, which covered machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing goods or for bringing about any change in any substance for manufacture of the final product. The Tribunal relied on the larger bench ruling in Jawahar Mills to hold that the listed items qualified as capital goods under the pre-amendment rule. On the declaration issue, the Tribunal applied the larger bench ruling in Kamakhya Steels and held that credit otherwise admissible could not be denied merely because the declaration was filed late. The objection that certain items were not directly connected with manufacture was also rejected in light of the broader test applied under Jawahar Mills.

Conclusion: The assessee was entitled to capital goods credit on the disputed items, and the departmental objections based on lack of direct connection and belated declaration failed.

Ratio Decidendi: Under the pre-amendment Rule 57Q regime, machinery and related items having the requisite manufacturing nexus qualified as capital goods, and otherwise admissible Modvat credit could not be denied only on the ground of delayed declaration.

---