Modvat credit on processing equipment upheld where items used to harden and polish goods were treated as capital goods under Rule 57Q.

Rule 57Q of the Central Excise Rules, 1944 was interpreted broadly to include machinery, equipment, tools, appliances and related components used for producing or processing goods. Items used to harden and polish the final product were held to be part of the manufacturing process, amounting to processing within the rule. On that basis, Modvat credit was admissible. Because the Tribunal's view was consistent with the rule, no referable question of law arose under Section 35H(1) of the Central Excise Act, 1944.

---

---

Issues: Whether the items used to harden and polish the final product were capital goods used for producing or processing goods within Rule 57Q of the Central Excise Rules, 1944, so as to justify Modvat credit and give rise to a referable question of law under Section 35H(1) of the Central Excise Act, 1944.

Analysis: The expression in Rule 57Q was wide enough to cover machinery, equipment, tools, appliances and their components, spare parts and accessories used for producing or processing goods or for bringing about any change in any substance for the manufacture of the final product. The items in question were found to be used in the manufacturing process to harden and polish the final product. Such use amounted to processing, and therefore the claim for Modvat credit was within the scope of the rule. As the Tribunal's view accorded with the rule, no referable question of law arose.

Conclusion: The claim for Modvat credit was admissible and the petition for reference failed.

---