Capital goods for Modvat credit excluded a factory computer used for design and drawing support, denying credit.

A computer used in the factory for design, precision drawings and support work connected with CNC machine production was not treated as capital goods under Rule 57Q because its admitted use was not in direct manufacture of the goods. On that footing, Modvat credit was held inadmissible. The denial of credit was therefore upheld and the appeal was rejected.

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Issues: Whether Modvat credit was admissible on a computer installed in the factory for design and drawing work connected with production of CNC machines, and whether such computer qualified as capital goods under Rule 57Q.

Analysis: The admitted use of the computer was for precision drawings, design of the product, and support for export orders, rather than for direct manufacture of the goods. On that basis, the item was not treated as falling within the definition of capital goods under Rule 57Q, and therefore was not eligible for Modvat credit.

Conclusion: The denial of Modvat credit was upheld and the appeal was rejected.

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