Modvat credit for machinery accessories was treated as admissible where items formed part of paper-manufacturing equipment.

Modvat credit was treated as admissible on pressure gauge, FBC boiler fans and similar goods where they functioned as accessories or components of machinery used in paper manufacture. The analysis applied Rule 57Q and reasoned that items forming part of the pulp mill and boiler, and thereby enhancing their efficiency, retained the character of eligible accessories or components. For the remaining disputed items, the record was said to contain no contrary discussion by the lower authority, and they were also regarded as components or accessories of machines used in manufacture. The denial of credit was therefore considered unsustainable on the stated facts.

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Issues: Whether Modvat credit was admissible on pressure gauge, FBC boiler fans and other items claimed to be accessories or components of machinery used in the manufacture of paper.

Analysis: The items in dispute were treated as accessories or components of the pulp mill and boiler, enhancing their efficiency and forming part of the machinery used in paper manufacture. The denial of credit was found unsustainable where the goods satisfied the character of accessories under Rule 57Q. For the remaining items, the record contained no contrary discussion by the lower authority, but they were also found to be components or accessories of machines used in manufacture.

Conclusion: Modvat credit was held admissible on all the disputed items and the denial was set aside in favour of the assessee.

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