Modvat credit for factory construction materials denied, while kiln-related items required fresh factual examination under capital goods rules.

Materials such as angles, plates and joists used in constructing a factory building do not qualify as capital goods for Modvat credit under Rule 57Q because building materials are not machines, machinery, plant or equipment. Credit on those items was therefore not admissible. By contrast, eligibility of items stated to have been used in the kiln depended on their actual functional use and whether the kiln formed part of the plant. Because the factual position had not been clearly established, that aspect required fresh examination and decision on remand.

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Issues: (i) Whether angles, plates and joists used in the construction of the factory building and kiln were eligible for Modvat credit as capital goods under Rule 57Q of the Central Excise Rules. (ii) Whether the claim for Modvat credit in respect of items used in the kiln required fresh factual examination.

Issue (i): Whether angles, plates and joists used in the construction of the factory building and kiln were eligible for Modvat credit as capital goods under Rule 57Q of the Central Excise Rules.

Analysis: Items used in the construction of a factory building cannot be treated as part of plant or machinery for the purpose of Rule 57Q. The explanation to the rule contemplates machines, machinery, plant and equipment, and the materials used in building construction do not fall within that expression.

Conclusion: Modvat credit on items used in the construction of the factory building was not admissible and the claim failed.

Issue (ii): Whether the claim for Modvat credit in respect of items used in the kiln required fresh factual examination.

Analysis: The extent to which the disputed items were used in the kiln was not clearly found by the authorities below. As the kiln may form part of the plant, the factual position regarding actual use had to be examined before determining eligibility.

Conclusion: The matter relating to items used in the kiln was remanded for fresh examination and decision.

Final Conclusion: The claim succeeded only to the limited extent of requiring reconsideration on the kiln-related items, while the claim for credit on materials used in factory building construction was rejected.

Ratio Decidendi: Materials used in construction of a factory building are not capital goods for Modvat credit, whereas eligibility of items said to be used in a kiln depends on a factual determination of their actual use and relation to the plant.

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