Modvat credit on refrigeration equipment allowed where it formed an essential process-control component of the manufacturing plant.

Refrigeration equipment installed as an integral and essential part of a manufacturing plant for process control qualified as capital goods for Modvat credit. The exclusion for goods used in refrigerating and air-conditioning appliances and machinery did not apply because the equipment was not used in the refrigerating and air-conditioning industry itself, but to maintain controlled temperature in the oxide plant. Credit was therefore admissible and denial of Modvat credit was unsustainable.

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Issues: Whether refrigeration equipment used as part of an oxide plant qualified for Modvat credit as capital goods, or was excluded by the exclusion clause for refrigerating and air-conditioning appliances and machinery.

Analysis: The exclusion under Rule 57Q(2) applies to goods of a kind used in refrigerating and air-conditioning appliances and machinery. The refrigeration equipment in question was established to be an essential component of the lead oxide plant and was used to maintain controlled temperature for manufacture, rather than as equipment employed by the refrigerating and air-conditioning industry itself. On that construction, the exclusion clause could not be applied to deny credit.

Conclusion: The refrigeration equipment was eligible for Modvat credit as capital goods, and the denial of credit was unsustainable.

Ratio Decidendi: An exclusion for goods used in refrigerating and air-conditioning appliances and machinery does not cover refrigeration equipment installed as an integral and essential part of a manufacturing plant for process control, where it is not used in the refrigerating and air-conditioning industry.

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