Modvat credit on repair materials allowed, but stainless steel sheets for a reactor tank were not eligible under Rule 57Q.

Iron and steel items, plates and sheets used for repairing machinery installed in the factory and used in manufacturing the final product qualified as capital goods for Modvat credit under Rule 57Q, because parts used for repair of eligible machinery were treated as admissible inputs. Hot rolled and annealed stainless steel sheets used to fabricate a reactor tank did not qualify, because the reactor tank was not specified capital goods in the relevant Rule 57Q table, so credit on those sheets could not be sustained.

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Issues: Whether the impugned iron and steel items, plates and sheets were eligible for Modvat credit as capital goods under Rule 57Q of the Central Excise Rules, 1944, and whether credit was admissible for hot rolled and annealed stainless steel sheets used in fabrication of a reactor tank.

Analysis: The disputed items were used for repairing machines installed in the factory and used in manufacture of the final product. On that footing, the items qualified for Modvat credit under Rule 57Q when used as parts for repair of machinery. The stainless steel sheets used to fabricate a reactor tank stood on a different footing, because the reactor tank was not specified capital goods within the relevant table under Rule 57Q, and therefore the credit claimed on those sheets could not be sustained.

Conclusion: Modvat credit was admissible for the impugned items used in repairing factory machinery, but credit on hot rolled and annealed stainless steel sheets used for fabrication of the reactor tank was not admissible.

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