Modvat credit on plastic crates allowed where intra-factory movement of intermediate goods made them material handling equipment.

Plastic crates used inside the factory to move semi-finished cops from one stage of manufacture to another were treated as material handling equipment integral to the production process, making them eligible for Modvat credit under Rule 57Q. The analysis turned on the direct functional link between the crates and manufacture: because they facilitated movement of intermediate goods within the factory, they fell within the capital goods/material handling equipment category. Authorities cited by the assessee supported credit where such equipment was used in production, while decisions relied on by the Revenue were found inapplicable on the facts.

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Issues: Whether plastic crates used within the factory for transferring semi-finished cops in the course of manufacture were eligible for Modvat credit under Rule 57Q as capital goods or material handling equipment.

Analysis: The item was used for moving intermediate goods from one stage of manufacture to another and was essential to the production process. The Court accepted that the nature and use of the crates brought them within the category of material handling equipment integrally connected with manufacture. The authorities relied upon by the assessee supported credit where equipment was used within the factory for shifting materials in the course of production. The decisions excluding the item from capital goods did not assist the Revenue because the factual use here showed direct linkage with the manufacturing process and admissibility under Rule 57Q.

Conclusion: Plastic crates were eligible for Modvat credit under Rule 57Q as material handling equipment, and the assessee succeeded.

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