Broad construction of capital goods under Rule 57Q covers an electrical transformer used as part of manufacturing plant.

Rule 57Q's definition of "capital goods" is to be construed broadly and includes machines, plant, equipment and appliances used in manufacture or for processing goods. Applying that liberal interpretation, the court treated an electrical transformer installed in the manufacturing unit as part of the plant and machinery because supply of power is a basic requirement of manufacturing. The transformer therefore qualified as capital goods, and Modvat credit was available to the assessee; the revenue's challenge failed.

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Issues: Whether an electrical transformer used in the assessee's manufacturing unit was "capital goods" eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The definition of "capital goods" in Rule 57Q is 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 a substance for manufacture of final products. The Court applied the Supreme Court's interpretation that the expression must receive a broad meaning and noted that supply of power is a basic requirement for manufacturing activity. On that basis, the electrical transformer used in the factory was treated as part of the plant and machinery used in manufacture.

Conclusion: The electrical transformer qualified as capital goods and the assessee was entitled to Modvat credit; the revenue's petition was rejected.

Ratio Decidendi: For the purposes of Rule 57Q, "capital goods" receives a broad construction and includes equipment forming part of the plant and machinery used in manufacturing, even if the goods are not directly engaged in the physical conversion process.

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