Modvat credit for fabrication inputs sustained where goods were used to make capital goods for production processes

A reference application cannot be entertained on a proposed question that does not arise from the record, and the departmental case had not treated the items as building material before the lower authorities. The goods were used to fabricate capital goods such as a boiler, turbine and molasses tank, and those capital goods were used in producing or processing goods. On that basis, the items fell within the scope of Modvat credit under Rule 57Q of the Central Excise Rules, 1944. No question of law arose, the reference application was rejected, and the assessee's eligibility for Modvat credit was sustained.

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Issues: Whether the reference application could be entertained when the proposed question did not arise from the record, and whether the goods used for fabrication of capital goods were eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The record showed that the impugned goods were treated by the lower authorities as raw material for fabrication of a new boiler, turbine and molasses tank, and the departmental case before those authorities was not that the items were used as building material. A reference cannot be sought on a point not emerging from the record. The goods were used for fabrication of capital goods, and such capital goods were used in producing or processing goods, bringing the items within the ambit of eligibility for Modvat credit.

Conclusion: No question of law arose and the reference application was rejected; the assessee's eligibility for Modvat credit was sustained.

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