Capital goods for Modvat credit: structural steel used for molasses tanks was held ineligible under Rule 57Q.

M.S. plates, angles and channels used to fabricate steel tanks for molasses storage were held not to be capital goods under Rule 57Q because they were used in construction of tanks attached to earth, not shown to be machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing goods. They were also not established as components, spare parts or accessories of qualifying capital goods. On those facts, the necessary nexus with manufacture was absent, and Modvat credit was disallowed.

---

---

Issues: Whether M.S. plates, angles and channels used for fabrication of steel tanks for storage of molasses qualified as capital goods eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The items were used in making steel tanks which were attached to earth and were not shown to be machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing any goods, or for bringing about any change in any substance. They were also not established to be components, spare parts or accessories of such capital goods. The user of the item was treated as determinative, and on the facts the requisite nexus with manufacture of final products was not made out.

Conclusion: The items did not qualify as capital goods under Rule 57Q and Modvat credit was rightly disallowed.

---