Accessories to manufacturing machinery can qualify as capital goods when they ensure effective functioning and support production.

Voltage stabilizers or voltage regulators used in a textile factory qualified as capital goods under Rule 57Q because they operated as accessories to machinery used in manufacture. The Court applied the ordinary and liberal meaning of "accessories" and accepted the finding that the stabilizer was essential for the proper functioning, maintenance, and regular production of the machines. On that basis, the stabilizer fell within the definition of capital goods in the rule's explanation and Modvat credit was admissible.

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Issues: Whether voltage stabilizers or voltage regulators used in the factory as accessories of machinery employed in textile manufacture qualify as capital goods under Rule 57Q of the Central Excise Rules, 1944 and are eligible for Modvat credit.

Analysis: Rule 57Q extended credit to specified duty paid on capital goods used in the manufacturer's factory. Its Explanation defined capital goods broadly to include machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing goods, and also the components, spare parts and accessories of such goods. The decisive question was whether the voltage stabilizer functioned as an accessory to the machines used in manufacture. The Court accepted the unchallenged finding that the stabilizer was essential for the proper functioning and maintenance of the machines and for regular production. It treated the expression "accessories" in its ordinary and liberal sense as something additional or subordinate that contributes to the effective working of the machine. On that basis, the stabilizer was held to fall within clause (b) of the definition of capital goods.

Conclusion: Voltage stabilizers or voltage regulators used to assist the working of manufacturing machinery are capital goods as accessories under Rule 57Q and Modvat credit is admissible; the reference application was therefore rejected.

Ratio Decidendi: Under Rule 57Q, an item need not be directly used in the manufacturing process to qualify as capital goods if, on its ordinary and liberal meaning, it is an accessory of machinery used in manufacture and contributes to its effective functioning.

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