Modvat credit on foundation materials denied where steel items only supported machinery and did not enter the manufacturing process.

Materials such as mild steel channels, angles, plates and joists used only to erect the civil structure and foundation for a forging hammer machine were not treated as capital goods under Rule 57Q. The goods merely provided structural support and did not participate in the manufacturing process of the final product; the machine itself was a bought-out item, and the assessee was not manufacturing it. Modvat credit was therefore denied, and the disallowance was upheld.

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Issues: Whether mild steel channels, mild steel angles, plates and mild steel joists used for erection of the civil structure and foundation of a forging hammer machine were eligible for Modvat credit as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The disputed items were used to prepare the civil structure and foundation on which the forging hammer machine was fixed. The machine itself was a bought-out item and the assessee was engaged in steel forging, not in the manufacture of the machine. The items did not participate in the manufacturing process of the final product and were used only for supporting and fixing the machine. The cited decisions were distinguished because those cases involved goods directly used in manufacture or necessary for the manufacturing process.

Conclusion: The items were not eligible for Modvat credit as capital goods under Rule 57Q, and the disallowance was upheld against the assessee.

Ratio Decidendi: Materials used merely for civil foundation or structural support of a machine, and not directly in the manufacturing process, do not qualify as capital goods for Modvat credit under Rule 57Q.

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