Liberal construction of capital goods under Modvat credit brought plant machinery and construction inputs within eligibility.

The scope of capital goods under Rule 57Q was construed liberally for Modvat credit. Crane with accessories and loader were treated as machinery and equipment used in the manufacturing process and therefore fell within the rule. The steel items and cement were accepted on the factual finding that they were used for construction of the plant and other components necessary to establish the manufacturing unit, with the user test supporting inclusion where the items were integrally connected to the manufacturing apparatus. The items were held to be capital goods eligible for credit, and the Revenue's challenge failed.

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Issues: Whether the goods in question, namely crane with accessories, loader, bulldozer, rebar coils, CTD bars, TOR steel and cement, were capital goods eligible for Modvat credit under Rule 57Q.

Analysis: The definition of capital goods under Rule 57Q was required to be construed liberally. Machinery and equipment used in the manufacturing process, such as crane with accessories and loader, fell within the scope of the rule. On the factual findings recorded, the steel items and cement were used for construction of the plant and other components necessary for establishing the manufacturing unit, and the user test applied by the Supreme Court supported inclusion where the items were integrally connected with the manufacturing apparatus.

Conclusion: The items were held to be capital goods eligible for credit, and the Revenue's challenge failed.

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