Modvat credit on capital goods denied where the goods are used outside the factory premises under Rule 57Q.

Capital goods used outside the factory premises are not eligible for Modvat credit under Rule 57Q of the Central Excise Rules. The Tribunal applied the Larger Bench view and the Supreme Court's approach that the decisive factor is use away from the factory, and it rejected the attempted distinction based on Rule 57A because the reference concerned capital goods, not inputs. The stated effect is that utilisation outside the factory disentitles the assessee to the credit benefit under Rule 57Q.

---

---

Issues: Whether capital goods used outside the factory are eligible for Modvat credit under Rule 57Q of the Central Excise Rules.

Analysis: The issue was covered by the Tribunal's Larger Bench decision and by the Supreme Court's view that capital goods used outside the factory are not eligible for Modvat credit under Rule 57Q. The distinction sought to be drawn on the basis of Rule 57A was not accepted because the present reference concerned capital goods, not inputs, and the decisive consideration was that the goods were used away from the factory premises.

Conclusion: Capital goods used outside the factory are not eligible for Modvat credit under Rule 57Q, and the reference is answered against the assessee.

Ratio Decidendi: For Modvat credit on capital goods under Rule 57Q, use outside the factory premises disentitles the assessee to the benefit.

---