Modvat credit on foundation and support materials for machinery held admissible where they were integral to manufacture.

Modvat credit was held admissible on cement, steel and steel angles used for the foundation and support structure of machinery because those items were integrally connected with the machinery and the manufacturing process. Rule 57A was applied on the basis that duty-paid goods used in or in relation to manufacture could qualify even if not contained in the final product, while Rule 57Q governed capital goods used in the factory. Denial of credit on the ground that the goods were outside both rules was held impermissible, and credit was allowed to the assessee.

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Issues: Whether modvat credit was admissible on cement and steel used in laying the foundation on which machinery was fixed, and on cement and steel angles used in constructing the support structure for machinery used in the manufacture of the final product.

Analysis: Rule 57A allowed credit on duty paid on goods used in or in relation to the manufacture of final products, even if such goods were not contained in the final product, while excluding only items that fell outside its scope. Rule 57Q governed credit on capital goods used in the factory. The cement and steel used for foundation and the cement and steel angles used for support structure were held to be integrally connected with the machinery and the manufacturing process, and the denial of credit on the footing that they were ineligible under either rule was held to be impermissible.

Conclusion: Modvat credit was admissible to the assessee on the disputed cement, steel, and steel angles used for foundation and support structure.

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