Capital goods under Modvat credit include plant components, accessories and process-control instruments used in factory operations.

Rule 57Q allowed Modvat credit on capital goods used in the factory, including machines, plant, equipment and their components, spare parts and accessories. Applying a use-based approach, H.T. switchgear panels were treated as components or parts of plant, protective chains for tyres as accessories to dumpers used for material handling, and logic controllers as process-control instruments regulating operation timing and sequence. On that reasoning, the items fell within the definition of capital goods and Modvat credit was admissible.

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Issues: Whether H.T. switchgear panel, 66 KV breaker, protective chain for tyre and logic controller were capital goods eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: Rule 57Q extended credit on capital goods used in the factory, including machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing goods or for bringing about any change in any substance for manufacture of final products, as well as components, spare parts and accessories of such goods. The items in question were examined with reference to their use. Switchgear panels were treated as components or parts of plant. Protective chains for tyres were treated as accessories to dumpers used for material handling. Logic controllers were treated as process-control instruments used for regulating operation timing and sequence. The user-based approach adopted in the governing precedent supported inclusion of such items within the expression capital goods.

Conclusion: The items were held to fall within the definition of capital goods and Modvat credit was admissible; the reference was answered against the Revenue and in favour of the assessee.

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