Modvat credit for spares and accessories of capital goods does not require independent tariff classification when qualifying use is shown.

Rule 57Q allowed Modvat credit on components, spares and accessories of eligible capital goods, and such items did not need to independently fall within the tariff entries applicable to the principal goods. The restriction in sub-rule (7) applied to the principal capital goods, not to spares and accessories covered by the specific entry. As tyres, tubes and flaps were used as spares or accessories of loaders that qualified as capital goods, denial of credit was unsustainable.

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Issues: Whether tyres, tubes and flaps used as spares or accessories of loaders were eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944 even though they did not independently fall within the tariff entries specified for capital goods.

Analysis: Rule 57Q distinguishes between capital goods specified in the table and components, spares and accessories of those goods. Item No. (v) of the table separately covers components, spares and accessories of the goods specified in items (i) to (iv), and does not require such items to independently satisfy the tariff classification applicable to the principal capital goods. The scheme of Modvat credit is based on the use to which the goods are put, and the restriction concerning installation or use in sub-rule (7) applies to principal capital goods, not to spares and accessories already covered by the specific entry. Since the tyres, tubes and flaps were used as components, spares and accessories of loaders that were eligible capital goods, credit could not be denied.

Conclusion: The tyres, tubes and flaps were eligible for Modvat credit as spares or accessories of the loaders, and the denial of credit was unsustainable.

Ratio Decidendi: Where a provision expressly grants credit to components, spares and accessories of eligible capital goods, independent classification of those items under the tariff is not required if their use as spares or accessories of the qualifying capital goods is established.

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