Modvat credit on capital goods turns on use with machinery and invoice evidence; some claims were sustained, others remanded.

Modvat credit on capital goods was allowed where the invoices named the assessee as consignee, and the factual finding supporting that claim remained undisturbed. Credit on ion exchanger was also sustained because it was used in the de-mineralisation plant for boiler feed water and formed part of the plant. By contrast, credit claims for steel structure, air conditioners, UPS and paints were not finally accepted because there was no finding that they were used with machinery or plant; those items were remanded for fresh adjudication on that test.

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Issues: (i) Whether Modvat credit on capital goods was admissible where the invoices showed the assessee as consignee. (ii) Whether Modvat credit was admissible on ion exchanger, steel structure, air conditioners, UPS and paints as capital goods, or whether the matter required reconsideration on the test of use with machinery.

Issue (i): Whether Modvat credit on capital goods was admissible where the invoices showed the assessee as consignee.

Analysis: The invoice finding recorded by the Commissioner (Appeals) showed the assessee as consignee, and that factual finding was not disturbed. On that basis, the credit claim on those goods stood supported by the invoices.

Conclusion: Modvat credit was admissible on this count and the Revenue's challenge failed.

Issue (ii): Whether Modvat credit was admissible on ion exchanger, steel structure, air conditioners, UPS and paints as capital goods, or whether the matter required reconsideration on the test of use with machinery.

Analysis: Credit on ion exchanger was upheld because it was used in the de-mineralisation plant for boiler feed water and formed part of the plant. For steel structure, air conditioners, UPS and paints, there was no finding that they were used with machinery or plant. The governing principle applied was that credit depends on whether the goods are used with machine or machinery; otherwise, the claim cannot be accepted without proper factual determination.

Conclusion: Modvat credit on ion exchanger was sustained, while the claims relating to steel structure, air conditioners, UPS and paints were remanded for fresh adjudication.

Final Conclusion: The Revenue's appeal succeeded only in part, with some credit claims upheld and the remaining items sent back for fresh consideration.

Ratio Decidendi: Eligibility for Modvat credit on capital goods turns on whether the goods are used with machinery or form part of the plant, and where that factual basis is not established, fresh adjudication is required.

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