Capital goods under Rule 57Q were read liberally, preserving Modvat credit for manufacturing equipment used before amendment.

Rule 57Q was interpreted as containing a pre-amendment definition of capital goods that was already wide and liberal, covering machines, plant, equipment, apparatus, tools and appliances used in manufacture or in processing goods. The later insertion of clauses (d) and (e) by Notification No. 11/95-C.E. (N.T.) did not materially change that position for the earlier period. On that basis, laboratory homogenizers, laboratory scientific and hospital equipment, gas detection systems, module under Chapter Heading 85.38, lube/sealant and tower packing used in the factory for manufacturing glycol and other industrial chemicals could qualify as capital goods, so Modvat credit remained admissible for 1994-95.

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Issues: Whether the amended definition of "capital goods" inserted by Notification No. 11/95-C.E. (N.T.) could be applied to the assessment year 1994-95, and whether Modvat credit was admissible on laboratory homogenizers, laboratory scientific/hospital equipment, gas detection systems, module under Chapter Heading 85.38, lube/sealant and tower packing as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The definition of "capital goods" under Rule 57Q, as it stood before the amendment, was already wide and liberal, covering 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. The later insertion of clauses (d) and (e) by Notification No. 11/95-C.E. (N.T.) did not materially alter that liberal scheme for the relevant period. The items in question were used in the factory for manufacture of glycol and other industrial chemicals, and the legal position recognized that such goods could qualify as capital goods even for the period prior to the amendment.

Conclusion: The question was answered in favour of the assessee. The Tribunal was correct in affirming Modvat credit on the disputed items for 1994-95, and the Revenue's challenge failed.

Ratio Decidendi: Where the pre-amendment definition of capital goods under Rule 57Q is already sufficiently wide and liberal to cover the goods in question, an amendment enlarging or clarifying the definition does not exclude those goods for the prior period, and Modvat credit remains admissible if the goods were used in the factory for manufacture.

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