MODVAT credit on imported capital goods was allowed where the prescribed Cost Accountant certificate substantially met circular requirements.

MODVAT credit on imported capital goods was held admissible where the assessee produced a certificate in the prescribed proforma under the applicable circular. Rule 57Q of the erstwhile Central Excise Rules, 1944 covered machinery, plant, equipment and similar items used in manufacture as capital goods. The circular for imports under the Project Import Regulations, 1986 accepted an independent Cost Accountant's certificate where separate invoices or exact identification were difficult, subject to verification. As the certificate described machinery, a coating machine, ancillary equipment and other items falling within the capital goods definition, the requirement was substantially met and denial of credit was unsustainable.

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Issues: Whether MODVAT credit on imported capital goods was admissible when the assessee produced a certificate in the prescribed proforma under the relevant circular.

Analysis: Rule 57Q of the erstwhile Central Excise Rules, 1944 treated machinery, machinery parts, plant, equipment and similar items used in manufacture as capital goods. The circular issued for imports under Project Import Regulations, 1986 accepted a certificate from an independent Cost Accountant where separate invoices or precise identification created difficulty, and the credit was to be allowed after verification. The description furnished in the certificate showed machinery, coating machine, ancillary equipment and other items that fell within the definition of capital goods, and the certificate substantially met the requirement of the circular.

Conclusion: MODVAT credit was admissible and the denial of credit was unsustainable.

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